(Forbes) The wealth management profession has evolved significantly over the past 50 years, which means so have the skills and responsibilities required to excel in this field. Today’s successful financial advisors behave more like investment counselors than portfolio managers. They forge deep bonds with clients, develop long-term plans according to family dynamics and values, and seek to deliver results that exceed client expectations.
Portfolios are one small part of the big picture.
There was a time when clients relied on financial advisors primarily to construct an investment portfolio of stocks and bonds. Today, creating an investment portfolio based on a client’s risk tolerance and financial needs is only one small part of an advisor’s role.
Thanks to the proliferation of financial products like mutual funds and exchange-traded funds, and policy changes such as the introduction of the 401(k), there are a wide variety of tools available to facilitate a “do it yourself” approach to financial management. And yet, because consumers have so much responsibility for the different aspects of their financial lives — from education planning, to retirement planning and estate planning — I’ve noticed that many find the counsel of a trusted professional more valuable than ever. And for those professionals, this means shifting from a tactical money management perspective to a holistic wealth management perspective that takes a client’s whole life into consideration including family and financial dynamics.
Specialization can pay off (for advisors and clients).
Because modern wealth management encompasses much more than a client’s investment portfolio, financial advisors need to be familiar with a variety of complex financial situations. For some professionals, specializing in a particular area of financial planning enables them to work with clients for whom that area presents a bigger challenge or has a high impact on the rest of their finances. In addition to renowned certifications, such as chartered financial analyst and certified financial planner, popular specialized designations for today’s wealth managers include:
• Certified divorce financial analyst: CDFA professionals complete a training program that teaches them to analyze and consult on the financial aspects of a divorce, such as dividing property, tax considerations, retirement assets and insurance issues. These individuals work with the client and their attorney.
More Than What’s On Paper: Dedication Comes With Rewards
• Retirement income certified professional: The RICP program teaches advisors how to build comprehensive retirement income plans. Advisors who have earned this designation have completed courses covering topics such as Social Security claiming, Medicare and retirement risk planning.
• Certified tax specialist and National Bookkeeper Association tax certification: Short of becoming a fully licensed certified public accountant, advisors can earn designations focused on tax preparation, knowledge and skill.
• Certified private wealth advisor: CPWA certification helps financial planners and advisors build strategies for the whole life cycle of wealth (accumulation, preservation and distribution) for high net worth individuals. One of the CPWA’s focuses is on family dynamics, which is particularly important for this cohort.
Beyond the robo: The value of emotional intelligence (EQ) is on the rise.
Because wealth management is so deeply tied to a client’s personal life, it increasingly demands a high degree of emotional intelligence. For example, a client who is working with an advisor to plan for retirement and long-term care will need to make decisions based on deeply personal and private information: their health, whether they wish to leave a legacy and, if they have children, which of their children may be capable and willing to serve as power of attorney or the executor of a will or trust. Clients want to share that information with someone they trust — not just any number-cruncher.
To be exceptional, wealth managers must go above and beyond the basic requirements of the job to serve their clients. They need to possess a high degree of empathy and be able to put themselves in their clients’ shoes. This requires an understanding of behavioral finance and the ability to recognize when anxiety over market volatility might be clouding clients’ judgment. They also need know how to listen to a client who needs to vent and which conversations should be had in person — such as during the 2008 crisis, when many fearful clients were looking for face-to-face reassurance. Most importantly, they must understand intrinsically that making sure the client feels taken care of is more important than outperforming a benchmark. In the age of robo-advisors, investment counselors who balance compassion and courage are truly differentiated.
Understanding the markets and being able to build and rebalance an investment portfolio remains a foundational element of a wealth manager’s professional duties. But to fully satisfy a client’s financial planning needs, today’s advisor must look beyond their account balances to become not only a money manager, but a trusted counselor.
