Advisors know which clients to put on which path to achieve the best big-picture result
Several people have asked me lately about the Questrade TV ads that feature someone in their 30s going to what appears to be their parents’ financial advisor to tell them why they are leaving. My first thought was, “Why did they visit an advisor they don’t like, in one case even bringing their baby, just to say that they are leaving — who has time for that?” My bigger thought was that the ads underscore how different my job is to what services such as Questrade do.
The first thing to remember is that different people have different needs at different stages of their life. Where a good wealth advisor can provide significant value to a 75-year-old couple with decent wealth and a complicated family situation, they may not be able to add nearly as much to a 40-year-old couple who are simply working and putting away a little each month. The best case for all involved is to have an individual with a financial need that fits well with their provider, whether that is a computer, a bank branch, or a highly specialized wealth advisor.
In our business, we find that we provide a good fit for two core groups of people. The first are those who are retired or in a transition from being employed to being retired. Much of the work we do relates to how best to draw on funds when the paycheque ends, being tax efficient and generating sizable investment income along the way (regardless of stock market performance). It would also include developing strategies that start with a likely estate value and working backwards to determine how you best want to live the last major period of your life and what legacy is important to you. This list of issues is very different from the typical experience with a low-fee online brokerage.
The second group are those with high incomes, both employees and those with corporations. There remain a few approaches to truly help these people on the tax front both on an annual basis and for the rest of their lives. Taxation often plays a large role in their investment decisions, and unique strategies are often key to providing them the type of value they are most looking for. Again, these individuals are often missing out on the bigger picture if they are going to simply find the cheapest online provider.
When I think about the areas of greatest value that a good wealth advisor can provide, they rarely relate directly to the best investment returns or the lowest fees. They usually come down to how you can help someone to have a better life because of the advice they receive. These issues come down to four key areas. These will not apply to everyone. Some people are in better financial positions than others, but most still bring some level of financial stress and worry. The four areas are:
Reducing financial worry and stress
This often starts with showing someone what their financial future will very likely look like on an annual basis and giving them the comfort that they will not outlive their money. It may also provide a financial stress test to show that under some less-than-ideal scenarios, they still will likely be OK. This plan will help them answer questions around whether they can help their children and still be in good shape, or whether they can afford to do something that is important to them. Sometimes this will show them the opposite, and will create the need for either lowering expenses, the possibility of finding additional income, or developing some other plan. In cases where there is more than sufficient assets, this foundation often opens the door to the “what to do next” discussion.
Teaching people how to spend their money
For many who lean toward being savers with their money, it can be very difficult to change this habit even if the facts show that they will have a lot of money that they never spend in their life. This can be especially important in changing their lifestyle in early retirement years of good health. Helping people to spend more, do more and take advantage of the maybe five, 10 or 20 years of decent health in retirement can be one of the most rewarding parts of our job. It can also have a big impact on improving someone’s life.
Leaving a clear and structured family legacy that provides peace of mind
This is extremely important for those with a child or grandchild that may not be able to become financially self-sufficient. In addition, there are increasingly families with second and third marriages and myriad stepchildren. Navigating these waters successfully can be crucial to how someone is remembered by family for generations to come. Often, these issues weigh heavily on people’s minds, and having someone who can help them create a plan to look after these issues can be the biggest value an advisor can provide. As one of my older clients recently told me, “I hope I live to be 100, but if I don’t make it and something happens to me now, I know that everything has been taken care of and that I am leaving my family in good shape.”
Leaving a meaningful charitable legacy that enriches a person’s life
For those that are projected to have a larger estate than what they want to leave to their family, charitable giving is often part of their plan. The earlier someone is aware of this scenario, the better they can plan in order to provide the greatest gift for the least amount of after-tax dollars. It also may provide great personal joy and satisfaction from knowing the impact they are having on a charity while they are still alive.
While there are many people who may not be a fit for some or all of the four key areas above, that is OK — they are likely a fit for a different part of the financial world.
However, when someone asks me about whether Questrade and their TV commercials affect my business, I just think about how different the issues I deal with are from what most people want from a roboadvisor or direct broker.
Reproduced from The Financial Post – June 3, 2019.
After a long and successful career, Ellen has retired from consulting and is winding down her corporation. She is 72, single and well off.
