Update
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Is automation phasing out the Financial Adviser?
This past weekend my wife and I took our daughter to the annual Home & Garden show. As we walked up and down the aisles at the massive convention center, I looked around with admiration and awe, but not for the reason you would think. Yes, there were beautiful bathroom, kitchen and patio designs, but what had my attention was a room full of small business owners passionately talking about their trade and more importantly, the specific value their business would bring to their potential consumer. Many of these services provide a real, tangible end-product: a new kitchen, a concrete stamped patio, a more efficient closet design, etc. Its rather easy for the consumer to visualize the value that these small business owners could potentially provide to their home.
As we continued to walk through the convention center, we came across a gentleman hosting a booth you wouldn’t expect seeing at this type of expo – a financial adviser. Because my curiosity typically gets the best of me, I found myself asking the adviser how his day was going and if this type of event provides solid introductions to potential clients. I shared with him that I too am an adviser. The conversation was light but quickly spiraled into the idea (his, not mine) that the Financial Adviser role, as we know it, will be phased out over the next 20 years. His reasoning was that the millennial generation will opt for automation over a face to face experience and the current need for folks like me, will be no more. At this point in the conversation, my wife was pulling me away to look at granite countertops, so unfortunately, I didn’t have the chance to dive into why I entirely disagree with this theory.
The value that a truly holistic financial adviser provides is something that will always be demanded by a certain group of investors, retirees. Between behavioral coaching and strategic income planning alone, an adviser can add over 2.5% of Net Returns on an annual basis.[1] Recently, we have seen a large pull back in the stock market due to the Coronavirus pandemic. From February 19 – February 28, the S&P 500 dropped over 15%. Many individual investors will emotionally act on corrections in the market, much like the dip we are currently experiencing. Individual investors may benefit from behavioral coaching from an adviser who can help deter the investor from a potential knee-jerk reaction to the noise in the current market space.
Tax efficient income planning is one of the most undervalued conversations in today’s retirement landscape. As a country, we are at the lowest tax rates we’ve seen in over 80 years, yet many retirees are receiving advice from their financial adviser to only take their required minimum distribution (RMD) from their retirement plan, in hopes to keep their annual tax rate as low as possible. In many conversations with clients, I am saying the exact opposite. Having a long-term approach to an income strategy can help save tens of thousands of dollars over the life of a retirement. Taxes are one of the largest deterrents in a retirement plan and ultimately in an estate plan. To have this conversation with folks early in retirement can help provide significant value to their annual income and ultimately the inheritance they leave for their loved ones.
The value that a financial advisor can provide is significant. I tell my clients: investment selection is the easy part; the overall plan is where the true value is found. If you feel that you aren’t getting the advice you deserve, feel free to reach out to Capital Preservation Group at mike@capital-preservation.com or (740) 972-1196 for a complimentary consultation.
[1] Vanguard – Putting a value on your value: Quantifying Vanguard Advisor’s Alpha; September 2016