The Financial Advisor - Do’s and Don’ts

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I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” These words of wisdom by Warren Buffett are often taken to heart by the financial advisor. To some it has become their mantra.

financial advisor faces difficult decisions every day. In their quest to render the best possible financial services to clients, they have to face up to tough choices.

Some advisors believe that one of the biggest challenges they face today is saving investors and clients from themselves. The pressure that came with the recession of 2008 left many in a difficult position. Extreme risk-aversion and following fads are just a few of the side-effects. Side-effects that the financial advisor must be alert to.

The vigilant financial advisor knows that steering habits and educating clients can make a little go a long way. Calling clients and balancing portfolios are necessary steps to defeating larger challenges that the financial adviser is up against.

Drew Horter believes that “as hard as it is to attract new clients, it may be even harder to keep them”. According to a 2012 survey by Paladin Registry and ByAllAccounts, more than 60% of affluent investors consider firing their financial advisor within one year. Horter says it is for this reason important for the financial advisor to consistently deliver high-touch client service. He recommends a “28 touches” system, through which the financial advisor interacts with clients for a minimum of 28 “touches” annually. This can be achieved through a combination of one-on-one meetings, newsletters, birthday cards, client appreciation events, phone calls and other means. Horter believes that “by being proactive and making frequent contact, the financial advisor can solidify close, long-term relationships with clients”.

Some believe the biggest challenge the financial advisor face today is efficiency. Mark Tibergien, CEO of Pershing Advisor Services believes that “the financial advisor is not struggling with finding new clients, but they’re struggling with how to do their business smarter. They continue to be pretty inefficient”.

There is also the dilemma of investors using multiple advisors. Many feel that it is unwise to put all one’s eggs in one basket.

Experts however say it is often not smart to diversify amongst financial advisors. One reason offered is that there is a potential of overlapping. Investment overlap is having two or more investments that you think are diversified, only to find out that a significant portion of each has the same asset classes.

Another reason why it might not be a good idea to diversify is that you’ll probably have increased risk. If both advisors buy the same thing, you may have too much of one particular asset class.

And then finally it’s really time-consuming to entertain the ideas of more than one financial advisor. You may waste tons of time. You’ll have to evaluate two sets of phone calls with investment ideas and two sets of meetings to review your investments.

Most specialists will therefore advise you to choose one financial advisor.

And you’ll know you’ve hit the jackpot when your financial advisor also shows a little genuine humanity. Or in the words of Maya Angelou: “Try to be a rainbow in someone’s cloud.”

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