Steve Gresham
Steve Gresham
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you capture assets that would otherwise be held by others . So it ’ s important that you look at a protection strategy as something that can increase your overall share of a client ’ s wallet .
“ Managed accounts are too complicated .” When managed accounts first arrived , the complaints from advisors rained in on their company headquarters , as they howled about the need for multipage investment policy questionnaires , client signatures and the additional registration required for them as investment advisor agents . The multiple asset classes , they argued , were too confusing to clients , as were all the subadvisors ’ names .
They often asked things like , “ Why can ’ t I just get the client ’ s OK on the phone ?” “ Why do I need an additional license like the Series 65 or 66 ?” “ Why can ’ t we use just the managers beating the market ?”
What they were likely afraid of was the new level of professionalism being asked of them , since the trend would require them to act more like advisors and less like stockbrokers . The managed account is not a product , said one of the industry ’ s pioneers , Len Reinhart . Instead , he said , it ’ s a service . It looked like the investing approach taken by consulting units such as his old one at Smith Barney that served corporate pension funds and endowments . Clients now had not just a personal advisor , but also a consultant selecting managers and tracking performance , as well as full-time investment teams managing their money .
Advisors who manage investments alone miss the opportunity to help clients with expenses and liabilities — and thus address their net wealth . In such cases , a client might be feeling confident about a $ 1 million nest egg but might not consider their potential longevity and the prospect of funding a retirement that stretches three decades or longer . The reality is that few retirement-age clients have enough
Advisors who manage investments alone miss the opportunity to help clients with expenses and liabilities — and thus address their net wealth . neur introducing anything new . Other classic responses in a similar vein include , “ People riding horses never asked for cars ,” or , “ People won ’ t ever need to hear music from or take pictures with a portable telephone .”
In reality , new products rise in profile when consumers start to demand them , and this is always threatening to complacent industries . Stockbrokers in particular never had to answer the question “ How am I doing ?” in the past . But the industry changed ; clients became responsible for their own vehicles , including retirement products like IRAs and 401 ( k ) s . As they did , they started to worry about returns , and then looked for better , more reliable , more transparent solutions than what brokerages offered them . If these clients needed help with this work , independent investment managers and trust companies were only too happy to provide custodial services and performance reports .
“ Annuities ” have matured to meet consumer demand , too . More than 100 products in a couple dozen categories have filled the annual Barron ’ s guide to the best annuities . Annuities offer income streams that can be extended to cover someone ’ s entire lifetime . They can begin at a specific age to match a client ’ s liabilities , they can include features to offset inflation , and they can incorporate death benefits and name specific heirs .
The unusual power of consumer demand is that consumers may not be able to name what they want — yet they can sure name what it does . Savvy marketers interpret these signals , and then the great innovators build the solutions . The best advisors need not rely on complicated illustrations or labor over lengthy applications when discussing annuities ; they can simply talk to the clients about what it is they want to accomplish . Since this involves the client ’ s self-preservation , this will likely be an emotional topic , and the solution will be an emotional one . Peace of mind is not an intellectual compromise for an advisor .
Emotional arguments likely won ’ t appeal to the doubters among mostly left- in assets to fund their longer lives , including the highly variable costs of healthcare and life care . The new theme is that clients will need to learn how to use limited resources over many years , which demands a new kind of professionalism from their advisors , whose aim is to protect the clients , not the returns . The definition of a “ financial advisor ” is changing once again and means something besides “ investment advisor .”
“ No one is asking for a managed account .” This is my personal favorite among the responses of certain advisors , whose perennial foe seems to be any entrepre- Continued on page 55
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