On Trusted Partners

We most powerfully sustain focus when we’re engaging our greatest skills, interests, and capacitiesDr. Brett Steenbarger

In boom times, investors begin to wonder if they can just “do it themselves”, buying index funds and speculating on a stock or two that catches their attention. This rarely ends well, as an objective match between risk profile and portfolio construction has not been done and reality eventually sets in.

It’s during these market shifts that the true value of an advisor emerges. Has the advisor educated clients on his or her stated investment philosophy? Aligned client goals and financial situation with a thoughtful plan? Coached them through the dual needs of conservative planning and disciplined investing?

Clients of these advisors are a lucky bunch, having found a trusted partner committed to designing a prosperous future. But how does the well-intentioned advisor, likely in demand by prospective clients, continue to deliver this level of care as business expands? The paradox is that those most capable of delivering on their promises are the ones most likely to reach capacity.

This is where the thoughtful advisor finds his or her own trusted partner, to gain efficiencies without losing the formula for personalized service that brought success in the first place. Help with planning, help with relationships, help with investments are just the start; there are also concerns about compliance, operations, and marketing that need to be addressed for a firm to remain in control of their practice.

So, what happens when chaos enters the markets? You know, the actual markets that are responsible for delivering the outcomes needed for this whole process to work? When these outcomes are under threat, whether real or perceived, even the most proactive firms can be pushed into a reactive mode as clients voice opinions and ponder decisions to adjust portfolios.

As Barry Ritholtz says here, the best strategy is the one you’re most likely to stick with, and it’s the firms with the most systematized processes that are most likely to stick to the plan. Advisors are human beings with strengths and weaknesses, likes and dislikes, and in times of chaos the weakest link in the chain becomes the process least likely to be implemented…or at least implemented well.

On days like those in late August, when supposedly liquid ETFs traded 10-20% away from net asset value, is an advisor’s time best spent updating weightings in a spreadsheet? Trying to find the best way to execute trades in a fast market? Probably not, especially with incoming calls and client-specific advice to be addressed.

The most successful advisor-client relationships are built around trust, including a trust that the advisor will deliver as promised. Not some promised rate of return, but delivery of a) an investment plan in line with the client’s risk profile, b) ongoing monitoring and implementation of said plan, and c) coaching along the way to keep the plan intact. While the client may not realize just how much effort goes into each of those steps, the thoughtful advisor considers each aspect and creates processes to enforce the required discipline.

It’s easy to see how a strengths-based approach to building an organization can foster the healthiest of advisor-client relationships. As a partner to RIAs, we see the most growth among firms who have properly matched their personalities with their duties, and leveraged technology and other human specialists to round out their service model. For advisors using a specialist to deliver personalized investment models, wild market swings are simply an opportunity to speak with clients while leveraging the resources of a partner to run their playbook in the background.

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