Beyond the Fundamentals of Financial Management

You’re a financial professional. You don’t need an overview of financial management. You could do a cash flow estimation and risk analysis in your sleep for Pete’s sake. 

And yet, some of the most insurmountable challenges financial advisors face aren’t financial at all. They’re people problems, mostly. 

We’ve outlined some of the most common pain points our advisors face. Plus we’ve included helpful tips to get you past these obstacles. 

The stormy seas of a fluctuating market

The best captains don’t try to fight stormy seas, they ride them out. You don’t need to be Eugene F Brigham to know the same logic applies when riding the waves of financial markets.

As a finance professional, you know timing the market is a pipe dream. Even if you could, making the necessary adjustments to every account each of your clients holds would simply be impossible. 

And yet, we have institutional knowledge. Financial data shows that downturns are inevitable every so often. Many advisors eschew sharing this information with their clients because they don’t want to have negative conversations. However, one of the fundamentals of financial advising is that, given time, markets recover. 

So what’s better? To attempt to soothe a surprised and disgruntled client with promises that markets will recover?

Or to say “remember when I said this will happen? Well, it’s happening, and that’s fine. In fact, we have an opportunity here.”

There are two keys to “defeating” market fluctuations. First, educate your clients so they’re not surprised when markets fall. Then, spin downturns as chances to add value over time by rebalancing accounts when prices are low. 

The obstacle course of regulatory changes

Dealing with regulatory changes can feel like running an obstacle course over and over. Except the obstacles keep moving around just as you’re getting used to them. 

Historically, regulations have become more and more strict over time. What’s more, you have different regulations in every state. If you have clients in three different states, you have three different sets of regulations to keep track of. 

If you work in a large finance department, you may have in-house regulations personnel. People who make sure your company isn’t doing anything the compliance officers will waggle fingers at. 

Even if you’re running your own practice, however, you have a compliance officer. There’s a problem, though. Many advisors see their compliance officers as enemies whose job is to slap them on the wrist when they mess up. 

But that’s simply not the case. You should see your compliance officer as a resource, someone who’s there to help you when you need it. 

Best practice is to nurture your relationship with your compliance officer. Go to them with questions, and get them gifts on holidays. This way, if you happen to make a mistake, they’ll be more than willing to help you out. 

The dark forest of client communication

One of the great fundamentals of financial management actually has nothing to do with finances or management at all. It’s communicating with your clients. 

In order to keep clients engaged in the process of financial planning, you’ll want to reach out to them regularly. The trouble is, you don’t want to bother them unless you have a valuable reason to do so. Nobody likes spammy emails or texts that have no purpose whatsoever. Don’t send those. 

Here are a few solid ideas for communications that would actually be helpful: 

• Real time data about the performance of their accounts. 
• Potential risk and rates of return for products they may be interested in. 
• Write blogs on helpful topics (like the basics of capital budgeting) to share. (Or, send clients our consumer blogs — we publish a new one weekly!)

If you’re able to regularly update your clients in helpful ways, you’ll achieve two goals. First, they will understand the great value you offer them beyond simply managing their accounts. 

Even better, they’ll begin to see you as someone who has their best interests at heart. 

The minefield of expectation management

One of the challenges of effective financial management is managing clients’ expectations. You want them to be excited to work with you and optimistic about their prospects. And yet, you can’t oversell your services or you’ll face disappointment down the road. 

Nobody wants to start a relationship out by speaking hard truths to new clients. And yet, as is usually the case, honesty is the best policy. 

Think about it: who would you trust, the person who sold you a pipedream and didn’t deliver? Or someone who was honest about inevitable poor performance and prepared you to take advantage of such a situation?

Prove to your clients that you’re trustworthy and have their best interests at heart. Show them you won’t lie just to make your bottom line. If you do, you’ll have earned their business for life. 

Even better, they’ll refer you to their family and friends, which is about the best outcome you could hope for.