What should an advisor really do?

There’s a lot of misconception about what value a financial professional can add.  And there are just as many questions about what an advisor does all day. Which tasks and priorities are actually of value for clients? I found this pretty inspiring:

In short, many occupations in my field are based upon ignoring the evidence about what actually works for investors. In my past life I spent a great deal of my working hours on tasks that ultimately added no value to clients. I spent hours of my day:

  • Researching and evaluating mutual fund and asset managers;
  • Meeting with peddlers of investment products;
  • Arguing with our investment committee over which managers to hire and fire;
  • Writing performance update memos to our clients;
  • Justifying (poor) performance to clients;
  • Justifying expensive investments to clients;
  • Explaining that “it’ll be better this time” to clients when introducing a new fund manager;
  • Traveling to onsite “due diligence” meetings, etc, etc.
Bloomberg Terminal.  NOT what I do all day.
Bloomberg Terminal. NOT what I do all day.

If you eliminate all of this useless busy-ness that adds no value to clients, what’s an advisor left to do?  A lot, as it turns out.

The work of a real financial professional:

  • Spending time understanding clients’ true financial goals and helping them establish, understand and prioritize those goals;
  • Working closely with their tax and estate planning professionals to help them achieve those goals;
  • Correcting behavioral biases and keeping clients from making the big mistakes;
  • Making investment decisions that matter: low costs, smart asset allocation, tax-efficient investing and tax-loss harvesting;
  • Then I’m talking with clients about everything other than their investment portfolio: their mortgage, other debt they have, wealth transfer strategies, charitable giving, paying for college, savings targets, an outside 401(k), a business sale, a home purchase, an inheritance, tax strategies, every big thing my clients face with their money.

And, of course, not wasting my time chasing investment performance means I can use that time more efficiently, gain economies of scale and pass those savings along to clients who may be paying much more under a percentage-of-assets arrangement elsewhere.

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