Tags: Revolutionizing | Financial Services | investment advisers | money

Revolutionizing the Financial Services Industry

By    |   Wednesday, 13 May 2015 07:37 PM

People searching for financial advice have a difficult time differentiating between a broker at a wire-house, as opposed to an independent adviser who is held to a fiduciary standard, providing guidance on a person’s entire financial life.

I know because I have spent the last twenty years of my career helping people understand the difference between a fee based, planning driven practice and that of a broker — or as they have rebranded themselves “wealth manager.”

I think it is very confusing to the public and maybe deliberately so.

A few years ago, I took the opportunity to become a part of a firm led by a visionary, undaunted by taking on the entire industry to create a completely new category called Financial Life Management. This truly describes the independent, unbiased, adviser who serves clients by understanding what matters most to them — beyond returns against some arbitrary index.

Only focusing on returns does not help people make better financial decisions, as confirmed by a Legg Mason study which found that people spend almost 1 ½ hours per day thinking about three main concerns; an illness that would deplete their savings, outliving their money, or inflation eroding the value of their savings. And when we drill down further and analyze people’s thoughts and feelings around money to find out what matters most, the unexpected result is that it’s not always about money.

As highlighted in a recent New York Times article, NY Times 3/21/15, United Capital, currently one of the fastest growing Registered Investment Advisers, engaged a research firm to complete a study interviewing individuals to help determine how money and investments fit into a person’s overall financial life. A surprising insight was that people rarely mentioned investment decisions as the most important event in their financial lives. What they did remember are the times they had to make tradeoffs around spending and working.

This lead to a counterintuitive discovery that a financial life isn’t about money, and that sometimes people have to make tough decisions that at times may mean making less money. The study also confirmed that many of our financial decisions are either moving you toward or away from living your ideal life. The clear tradeoffs are time, money and energy. You can’t get more time, your energy needs to be replenished when depleted. And how money is used bridges the two. This consultative approach, newly coined as “financial life management,” guides people to make smart financial and lifestyle decisions that improve their whole life. This in fact revolutionizes the old approach to investment management which focused only on returns.

The “wealth management” business has been destined for enormous change for some time, given the price compression in the industry and the advent of “Robo Advisors,” but also, as United Capital points out, with the increasing sophistication of investors, “maximizing net worth is no longer just about money, but more about maximizing their quality of life.”

The pinnacle of change in financial services is not just knowing what keeps clients up at night, but going beyond a financial solution to provide the platform to guide people toward their best financial life.

Thus, is it not the responsibility of investment advisers to help people have more clarity about what really matters most and what they are saving money for, beyond returns, in order to help them live their best “rich” life? We believe it is.

Kathleen A. Grace, CFP®, CIMA® is a Managing Director at United Capital and Amazon Best-Selling Author of Prince Not So Charming, a financial planning novel.

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The pinnacle of change in financial services is not just knowing what keeps clients up at night, but going beyond a financial solution to provide the platform to guide people toward their best financial life.
Revolutionizing, Financial Services, investment advisers, money
Wednesday, 13 May 2015 07:37 PM
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