3 Industry Changes Financial Advisors Want to See:

A Short Wish List on Behalf of Clients

From investor demand for greater transparency to government regulations reshaping the day-to-day interactions between financial professionals and their clients, the past decade has seen mandates imposed within the financial industry by those who are not professional financial advisors.

So, what do those working in the industry’s trenches – the advisors themselves – say they would like to see transformed within the industry? Here’s what we found.

Use the KISS Method to Read the Fine Print

Keep It Simple Stupid! After all, why make things more complicated than necessary? Right?

Well, that approach is ignored within the financial services industry where legal documents and the associated fine print just “comes with the territory.”

In January, the FDIC (Federal Deposit Insurance Corporation) reminded citizens that the idiom, “knowledge is power” applies to their finances and encouraged investors to spend more time reading and reviewing disclosures and fine print.

“To ensure that you get a fresh financial start for 2021, we want to remind you to read the financial disclosures and statements provided with your banking services, so you know what is available to you, what fees may be associated with your accounts and what your benefits are,” was the advice given in the agency’s Jan. 22, 2021 online FDIC Consumer News bulletin titled, “Start the Year in the Know.”

That was nice of big brother, but how can consumers and investors determine if the disclosures and the fine print truly contain the information they need for a simple grasp on risk?
Investopedia’s Brian J. Bloch – a 30-year veteran of financial journalism took the bull by the horns in a recent article by listing five criteria he thinks investor risk warnings should meet to be effective.

Paraphrased, the five points are:
• Quantification that gives investors an educated idea of how much money could be lost.
• Easy-to-understand language explaining risk factors.
• Require that both the buyer and seller of an investment sign the risk warning.
• Internet-based risk warnings that upgrade investor awareness rather than encourage quick click-through to get the deal done.
• More personalization in warnings to encompass not only how much money could be lost and how, but also include what other investment products may or may not be a better fit for that particular investor.

“Risk is fundamental to the investment process, but remains a concept that is not particularly well understood by most regular investors,” Bloch wrote. “For this reason, risk warnings – those vaguely worded fine print disclaimers at the bottom of financial documents and website – are extremely important for both buyers and sellers.”

Chadgordon224Chad Gordon, a wealth advisor with GreenStar Advisors located in Centennial, Colorado, agrees that simplified risk disclosure is needed within the financial services industry.

“The concise simple disclosure of costs, commissions and conflicts of interest would quickly shut down many of the dark areas of our industry,” Gordon told Advisors Magazine. “We have become desensitized to dense, opaque legal language.”

Stop Trying Just to Sell

Adam Tau, cofounder and investment advisor representative with Dynamic Wealth Strategies, Inc., located in New York City, said the industry needs to stop trying to “sell” a product and instead look to “solve” a need.

“Do it the right way,” he said. “I’ve found when someone comes in from a bad experience, they talk negatively about a product or investment. But what we often find is, it’s not the investment that’s the issue. It’s more that person or that family didn’t belong in that investment. It wasn’t the right fit.”

Ramp Up Education Because Investors Believe It Helps

More than a third of people answering a recent inquiry into the role education played in managing money during the COVID-19 pandemic gave themselves a grade of “C” on how effective the financial knowledge they had was in their decision-making during 2020. They indicated they had not learned enough about money management in school, but wished they had.

In a two-day study conducted by D.A. Davidson at the end of March 2021, nearly half of the respondents admitted an increased level of financial literacy would have helped them better manage money during the pandemic. Narrowing the reporting to answers from Gen Z only – those born in the mid to late 1990s through the early 2000s – saw that number jump to more than 70 percent.

The data suggest that investors believe education is helpful.

Scott Pederson, owner of Harmony Wealth Management, LLC, based in the greater Chicago, Illinois area, said his experience as a financial advisor shows that educated investors equal successful investors.

He would like to see the industry as a whole ramp up its collective effort to educate investors as he remains dedicated to client education.

ScottPed242“This is a motto that I believe in and use at my firm,” Pederson said. “The more you educate investors on investing, the economy, and financial planning topics, the more comfortable the investors are going to be with the process of investing over the long-term to meet their goals and needs and not letting emotional decision-making derail the success of their financial plan.”

What are your thoughts? What do you think needs to fundamentally change within the financial services industry to better serve clients?

Email us your thoughts at This email address is being protected from spambots. You need JavaScript enabled to view it..

Securities and advisory services offered through Madison Avenue Securities, LLC (“MAS”), Member FINRA/SIPC and a Registered Investment Advisor. Dynamic Wealth Strategies, Inc. and MAS are unaffiliated entities.

Follow Us

Subscribe to Our Newsletter

What's Next, Updates & Editorial Picks In Your Inbox

© 2017-2021 Advisors Magazine. All Rights Reserved.Design & Development by The Web Empire