Wealth Advisors: Stop Asking ‘What?’ and Start Asking ‘Why?’


How do you define “wealth?” Is it having $1 million in the bank? Or $10 million? Is it the ability to purchase luxury cars and vacation homes, or is it more about the freedom to spend your day pursuing hobbies outside of an office?

As a financial advisor, I can tell you that if you ask 100 people what wealth means to them, you’ll get 100 different answers. The way we spend, manage and think about our money is so personal. The reason someone may choose to work 60+ hour weeks or choose to spend their tax return on something one might see as frivolous, is personal. Because our definition of wealth is so different, the way we approach managing money must be tailored to everyone.

I have been in the industry for 25 years as a wealth advisor and now leading a team of advisors. I’ve witnessed the incredible evolution of the industry, moving from a transactional exchange to more of a relationship-driven one. Yet, outdated wealth management practices are still costing us.

Take for example my client who used his tax refund this year to buy a new television. The age-old reaction from a traditional financial advisor would have been to remind him that, “you should have invested that money or put it in a retirement account.”

But instead of critiquing his decision, I asked why.

He lived in a neighborhood with a high crime rate and his home was a place where the neighborhood kids, including his own, would gather after school. The television helped make sure his house was a hub they would keep coming back to.

It’s time for wealth advisors to acknowledge there cannot be a one-size-fits-all approach to wealth management. Money is personal. And now it’s time to get personal about wealth management.

The Hurdles Holding Us Back

There are many misconceptions surrounding wealth management that have left potential clients feeling disconnected from discussions about wealth and wealth management. Many myths persist that lead people to think wealth management is only about investing, requires a huge minimum fee to participate, or strictly benefits older people. With many financial institutions requiring minimums of $500,000 to $1 million or more, it is no surprise that nearly half of Americans think financial advisors are only for wealthy people.

Then, there’s the templatized approach to wealth management that has remained unchanged over generations. It’s easy to understand why younger generations would assume the advice offered by Generation Xers (the average age of a wealth advisor is 57) is out of date and irrelevant.

This well-weathered, often cookie-cutter approach to advice can prevent people from seeking wealth management early on. It’s our duty as wealth management professionals to dive into the details to understand our clients and accurately assess the needs of those we’re advising, so we can provide well-tailored advice.

As wealth advisors, curiosity about our clients is critical. Their experiences impact their perception of money and inform where they will get the most value. You can’t templatize that. You must ask the right questions.

Unfortunately, this behavioral approach is still mostly rooted in academia. But it can live outside of the lecture hall, and I’ve seen first-hand how it can result in positive behavioral changes.

Get Personal

In the world of finance, it’s easy to be analytical. To change perceptions about wealth management, we need to remember we’re dealing with people.

By uncovering subconscious beliefs and core experiences that influence their clients’ money habits, advisors can help them make behavioral changes to achieve their financial goals.

A colleague of mine had a client with a solid salary but a tendency to put in more than 60 hours a week to make a little extra money. Financially speaking, that’s a good thing. But our advisor knew this man had two young sons at home—and in sessions, he lamented about missing valuable time with his kids.

Without that knowledge, the financial advice may have focused on how to invest those extra funds. Instead, the client was advised on how he could cut back those hours while staying financially secure, something he described as, “the most honest advice I’ve ever received.” Now, he’s planning to coach his son’s baseball team next year with his extra time outside the office.

Old-school wealth management might see this as overreaching. But what we’re doing is considering what our clients value most—yes, that touches the financial, but it goes much deeper.

Wealth Management Is for Everyone

So, what’s next?

We need to lower the cost of entry and meet people where they are, sometimes literally. Wealth management was once all phone calls and in-person meetings. We don’t live in that world anymore.  We need to adapt. Apps, Zoom calls—you name it, we should explore it.

Most importantly, we need consumers to understand no matter what stage of life they’re in, they can benefit from personal financial advice. An advisor can help with a lot of things money touches. We’ve even provided a second opinion on negotiating a stronger job offer.

Advice on how to spend, save and manage money is incredibly personal—and so should be the advice we give. It’s not just about how much is in an account or where money is being invested, it’s about what’s most valuable to that individual, to their family. Let’s call it what it is and should be: personal advice.

 

Nicole Cope is a senior director at Ally Invest Advisors, with more than 25 years of experience in the field.



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