Clients with Advisors Continue to Outperform
Families and individuals who rely on financial advisors continued to outperform investors without advisors, even as the COVID-19 pandemic roiled markets and brought new uncertainty to portfolios.
Despite those challenges, “The value of advisor-to-client advice was on full display as advisors achieved record client and asset retention” in 2020, McKinsey & Company stated in its annual survey of North American retail wealth management. Meanwhile, Russell Investments’ 2021 “Value of an Advisor” study found comprehensive wealth management advisors delivered value of 4.83% in the United States. “Given the volatility seen in 2020, it’s no surprise that the biggest contributor to advisor value is your role as a behavioral coach,” Russell told advisors. “In fact, this category on its own more than offsets the 1% fee advisors typically charge for their services.”
Greg Frank, AWMA®, president and owner of Missouri Hills Wealth Management LLC in Jefferson City, MO, noted numerous studies have compared the financial outcomes for people using advisors versus those who do not. That research consistently demonstrates the value financial professionals provide their clients.
“They're not saying that everyone has to have an advisor,” Frank said. “But the studies found that people with advisors generally accumulated more wealth over time than those without. Advisors provide the steady hand during uncertain times. They know when clients might put new money to work and when to pull money out of the market. Those are some of the reasons it makes a lot of sense to have an advisor who provides the human touch.”
Another advantage was the advisors’ ability to prepare clients in advance for the type of unexpected market turmoil of 2020 and early 2021. Frank said few of his clients expressed panic over the market’s direction because he had already told them what to expect when an economic downturn occurs.
“They already understood some of the tough things that can happen to their portfolio,” Frank said. “We had previous conversations saying, ‘We don't panic; we don't rush out and change our philosophy just because the market's down 20%.’ Unless something drastic changes in your life, we don't really look to change what we're doing overall.”
Afterwards, once clients see the benefit of staying the course, they will be a little more trusting when the next crisis occurs, he continued. Frank said he tells clients that rather than panicking when the next crisis comes, they should look for ways to invest more cash or reallocate their portfolio to take advantage of potential opportunities during the downturn.
Long-term planning for retirement also factors into those conversations. With people living longer, the retirement window extends well beyond the previous generation’s 10-year timeframe. Modern plans anticipate growth to support a 25-, 30- or 35-year retirement – or even longer, for those who retire early.
“I tell my pre-retirement and retirement clients that investing for retirement is not a brick wall,” Frank said. “You don't get up the day you retire and immediately change your portfolio to something ultra-conservative. The old models of having more and more income exposure no longer work. You’ve got to have some growth component, even for somebody who is 65 or 70 years old. Otherwise, the values of your assets will decline over time, and no one wants to see that.”
Part of that approach involves educating clients to understand the long-term process. Frank said a large part of his tailored planning approach is helping people to look beyond what their portfolio did last month and focusing on their investment horizon, which can stretch out for decades.
Frank said he develops a customized plan for each client. He reviews each person’s situation and creates a model of what needs to be done to pursue their goals. The philosophy includes creating an approach that each client is comfortable with, plus providing the financial education required for them to understand the plan.
“I pride myself on trying to meet clients where they're at with their past experiences,” he said. “We talk about everything from what they learned as a child through adulthood; how they look at their wealth; and what they want to do with it. I ask more questions to understand what experiences they've had, and what things they like or don't like.”
The firm also educates younger clients on how to get started, what it means to have wealth, and how to build it, Frank continued. He gets many of his referrals through existing client relationships he has with their parents or other family members.
“I look at that as trying to help the next generation,” he said. “It's a blessing to be able to help their children build their own wealth, and to be ready to take on wealth when they possibly inherit it in the future.”
For more information on Missouri Hills Wealth Management, visit missourihillswealth.com
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
