More than products or models, financial advice is about helping clients reach their goals.
A client couple once told me that while they appreciated how I managed their money, they were really paying me for “transparency, simplicity and peace of mind.” That line stuck with me so much that I registered it as a trademark to convey the ethos projected by my firm.
I believe our profession focuses too much on selling performance, pushing products and models that offer high returns. If more firms emphasized open communication over products, there would be greater comfort with our industry as a whole.
Clients consistently request more transparency. They want to have frank conversations about the pros and cons of various investment strategies in terms they can understand. So why shouldn’t we offer that discussion upfront, as part of our services? Clients deserve to understand the pros and cons of any approach that’s presented to them, as well as all fees and other potential costs, such as lack of liquidity and taxes. We must be able to explain issues clearly so that they have a greater knowledge of their own finances.
More importantly, when you put finance in simple terms for clients, you can increase not just their understanding but also their faith in the investment vehicles they’re using. If a person has confidence in their plan going into a volatile market, they’re more likely to stick with it as opposed to suddenly jumping to another strategy and possibly hurting their long-term prospects.
When it comes to an investment strategy that is easy to explain to clients, we have found index funds can work across a variety of asset classes. Evidence is consistent that these funds perform well, and they come with an extra benefit: They’re transparent and easy to understand. Obviously index funds aren’t for everyone, but keep-it-simple index investment strategies often win the day.
Clients should understand investing as a tool that helps achieve specific, personal goals. When starting a relationship with a family, regardless of their wealth level, we ask: What kind of thumbprint do you want to leave on the world? Is it important to spend more time building your business, contributing to social causes, or concentrating on your family?
Our job isn’t to sell products or models. We’re hired to provide counseling, transparency, understanding and frank conversations about how to craft the most meaningful finance solutions.
Kim Eckart originally published this post in The Wall Street Journal adviser voices section.