The financial services industry is still recovering from the effects of the financial crisis. Positive impacts from the crisis include new regulations and clients taking an increasingly active role in their economic destiny. Reinforcing this is that all participants—financial advisors, clients, and regulators—are all welcoming the greater transparency and convenience that new financial technology (FinTech) is bringing to the relationship.
Another positive of the crisis is that it has created new client experiences and a new role for financial advisors. Clients are now in charge more than ever and know what they want and expect. They demand real-time information in everything they do, whether it be shopping or accessing investment information. The smartphone, in particular, has facilitated this. Investors clamoring for transparency and technology helps create a new, more empowered investor. Financial firms that do not address these changes run the risk of losing their clients.
Today is a pivotal time for an industry that was previously shrouded in secrecy before the financial crisis. Today, financial intelligence—through transparency and more high-value advice—is the only way that the financial services industry can survive. Online access and portfolio automation have allowed clients full access to their accounts and greater insight into its workings. This gives investors more piece of mind and a longer-term view of their goals while allowing the advisor to be more strategic with their advice.
FinTech helps the advisor focus on the role they should occupy—the giver of financial advice. This advice takes into consideration the whole client, their evolving situations, values, and expectations. With transparency and technology at the forefront, a higher value relationship between the client and their advisor is happening. Time is not wasted on administrative tasks since technology takes care of the heavy lifting. Clients have full access to update information and make changes themselves, with technology notifying the advisor.
With regulatory changes after the crisis and the new technology developed by startups and financial companies, there isn’t a better time to be an investor or a financial advisor. FinTech tools are available to us to see the real-time performance and plan accordingly to an investor’s ever-changing situation. We encourage all investors to take an active role in their financial lives by discovering and using the technology tools available today and the new tools in the future.
At some point along your life’s journey, you might find yourself at a crossroads looking back thinking, “Is this it? Is this all there is to life?” while considering the path ahead of you. It can happen at any time- you’ve spent your life building something that has taken all your blood, sweat, and tears and you realize you’re looking ahead to the remainder of your life and pondering how you will be remembered. For many, this is the impetus for a life change- not the money they accumulated or the business they built, but what they intend to do with the years they have left, and what legacy they will leave.
As a society, we tend to focus on the first half of life and not the second half, which many times can become the most fulfilling. The first part of life is filled with plans, projections, and goals to get to the next phase of our business (or life). It’s easy to become consumed with what you need to do to achieve success, but the joy often fades when success comes. Sometimes the more successful one becomes, the harder it is to find happiness and fulfillment. Success and money suddenly aren’t as compelling as they once were.
When people discover their passion, sometimes they realize that all of the successes and skills gained and wealth accumulated, can be used to better the lives of others, and ultimately the planet. Bill and Melinda Gates, The Buffet Family and other successful entrepreneurs have been inspiring examples of prioritizing higher causes and donating significant wealth during their second half of life. For these individuals, it has become their focus to create something impactful, lasting, and personally fulfilling instead of just retiring with a pile of cash.
You alone have to decide if your life goal is success or significance- it’s your life. It takes opening your eyes, looking inside yourself, and determining if you’re happy with the life you’ve created. If you’re not satisfied, commit to discovering your passion, whatever that may be. Saving for your second half of life is essential, but so is having a love for it.
suit·a·bil·i·ty: The quality of being right or appropriate for
a particular person, purpose, or situation.
The definition of suitability seems quite easy to understand
and should be clear when it comes to investment recommendations to
clients. However, many times when
clients come to our firm the investments they have are not suitable for
them. We base this conclusion on a set
of objectives to consider. Determining suitability includes an examination of the client’s
demographics such as age, income, willingness to take on risk, and aversion to
risk. Additional factors include how
long until the client liquidates the investment, likelihood of recovery from loss,
and current financial health including personal debt, and tax
considerations. A suitable investment
for a forty-five-year-old will look very different than an investment for
someone entering retirement.
Only after getting to know our client through
these objectives, or ‘facts’ can we start to develop an investment
strategy. Suitability is not always
clear-cut and is often in flux. What
seems like a suitable investment one day can change with the correction of the
stock market, suddenly becoming an unsuitable one. For this reason, constant monitoring of
investments coupled with performance and the ever-evolving circumstances of the
client make suitability critical to an overall investment strategy. We ask a lot of questions during our
meetings for this reason.
The client has a crucial role in their suitability as
investor knowledge and understanding come into play inside their
portfolio. However, this doesn’t that
mean that if an investor understands the investment and all associated risks,
is it a suitable one. Unsuitable
investments can ruin a portfolio and can be a source of on-going stress for the
investor. Our recommendations consider
suitability, but for those investors that execute an investment on their
initiatives outside our advice, there is not much the securities regulators, or
we can do. Advice and suitability must
come first, asset allocation second, and the execution of the investment last
as a continuous process.
Suitability is part of fiduciary standards. We operate our business in this manner and
are legally bound to recommend only suitable investments to our clients.
How did you learn to manage money and understand the value
of investing? Did your parents relay to you what they knew about money or
did you read books on budgeting and investing in figuring it out yourself?
The reality is that many of us did learn through trial and error.
An alarming statistic is that in the US only 14 states require a class in personal finance and 20 states require a class in economics to graduate from high school. If you aren’t teaching your family about money management and investing, they aren’t getting it. One of the ways families maintain wealth and pass it to future generations is through financial literacy. Financial education will preserve the wealth of the current generation and onward if you adopt it as part of your family’s legacy to educate versus becoming a statistic.
If you don’t consider yourself an expert in financial literacy, we would like to help take some pressure off of you. Understanding how money works and learning to resist the temptation of spending more than one earns should start at an early age and be reinforced through the teen and college years.
Even children at a young age understand their purse or wallet being empty and not being able to buy a treat when they go to the store. Not giving in when they have no money and purchasing it anyway doesn’t teach them anything. Even in a crowded store with your child throwing a temper tantrum, some lessons will last their entire life, if you take the time to teach them.
How do you start the conversation with children? By asking them what they think investing is, naming types of investments, and what they want to learn about money and investing. Teaching concepts and terms related to investing, its importance, and managing their money is part of the conversation. If you think about it, this is very similar to how we start the discussion with adults after our initial meeting; what do you know about investing, why is it important to you, and how should we invest so that you can live a more fulfilled life?
Focusing on the importance of math, giving the next generation a look into the world of investing starts with basic Finance 101; the bank accounts for spending and saving, brokerage accounts, and the ‘why’ behind investing. Children don’t always equate that an investment can be anything from a house to a brokerage account being used to save for retirement. If we give our children the basics of money management, we help them develop the best strategy to preserve their wealth, the wealth of their children, and so on. There’s no better strategy to preserve wealth than financial education for this and the next generation.