Your Value as an Advisor QUANTIFIED

The Challenge: Quantifying Your Value

Many advisors struggle with quantifying their value. Clients often wonder why they should pay for advisory services when they could potentially manage their investments themselves. As advisors, it's essential to articulate the specific, quantifiable benefits you provide.

Key Insights from a Comprehensive Study

One of the most comprehensive studies on this topic is conducted annually by Russell Investments. This study breaks down the value of an advisor into several components, demonstrating how each element adds to the overall financial outcome for clients.

1. Active Rebalancing and Asset Allocation

One of the significant areas where advisors add value is through active rebalancing and asset allocation. Ask yourself:

• Would your clients actively rebalance their portfolios without your guidance?
• Would their asset allocation remain aligned with their goals?

Rebalancing is crucial because it maintains the desired risk level in a portfolio. Without it, portfolios can become riskier over time, especially if equities outperform fixed income, skewing the balance. Advisors ensure that clients’ portfolios are regularly rebalanced, selling high and buying low, which is counterintuitive to most investors’ instincts.

Quantifiable Benefit: Rebalancing alone adds approximately 0.11% annually to a client's financial outcome. This might seem small, but over time, it significantly impacts the overall portfolio performance.

2. Behavioral Coaching

Behavioral coaching is arguably the most critical service advisors provide. During market volatility, advisors play a crucial role in preventing clients from making impulsive decisions driven by fear or greed. Advisors help clients stay the course and avoid the common pitfalls of emotional investing.

Quantifiable Benefit: According to the study, behavioral coaching adds an average of 2.82% annually to a client's portfolio. This substantial figure highlights the importance of having an advisor who can guide clients through emotional decision-making processes.

Addressing Common Client Concerns

Many prospects have preconceived notions that can be barriers to engaging with an advisor:

• Past Bad Experiences: Clients who had negative experiences with previous advisors often generalize this distrust.
• DIY Mentality: Some clients believe they can manage their investments and save on fees.
• High Fees: Clients may perceive advisory fees as too high without understanding the value provided.

To overcome these objections, it’s crucial to educate clients on the specific benefits you offer and how these benefits outweigh the costs.

The Financial Sherlock Holmes

As an advisor, think of yourself as a financial Sherlock Holmes, uncovering clients' past experiences, traumas, and personality traits. Understand their financial goals and fears to provide personalized advice that resonates with them.

Conclusion

Quantifying your value as an advisor involves more than just managing investments. It's about providing strategic rebalancing, behavioral coaching, and personalized financial planning that collectively enhance clients' financial outcomes. Use these insights to articulate your value to clients, helping them understand why having a trusted advisor is indispensable.