Wealth management has become a more complex task since the Financial Crisis of 2008. Clients are less trusting and have found additional avenues to diversify the management of their money. With every additional investment account, your clients make it more and more difficult for you to gain a complete picture of their wealth and help them meet their financial goals.
Despite your talent, you’re unable to deliver superior, informed advice without modern technology. Certain wealth management solutions solve the issues of “account diversification” by giving clients the control to provide you with data on their held-away assets. This insight empowers you to offer more impactful advice.
What’s the problem with not having knowledge of client assets that are outside of your control? Well, not only are you unable to support your clients to the best of your ability, but their savings and investments are also at stake.
The following are the three greatest consequences of incomplete visibility into your clients’ total portfolios:
If your clients have substantial wealth in accounts that are beyond your control and visibility, there is a good chance that you could advise them incorrectly, however unintentional it may be. With knowledge of only their assets under your management, you may recommend investing in higher-risk assets when perhaps they really shouldn’t.
Let’s say, for example, that you determine small caps will perform better than large caps, and you adjust your client’s investments accordingly. Without your knowledge, the client and his or her other wealth management advisor reach the same conclusion, reallocating assets across various accounts into small cap funds. Now, your client is heavily overinvested in small caps.
Clients put themselves at risk if you cannot take a holistic approach.
How do you provide proper guidance without complete information? In order to make the best decisions and give the greatest advice, you need to take a holistic approach to managing client wealth. This is incredibly difficult without visibility.
The more you know about your clients’ total portfolios, the better you’re able to consider the effects of holdings that are outside of your control.
Think of this analogy: When you visit a doctor for the first time, you’re asked to complete a health questionnaire, from allergies to family history. Obviously, it’s in your best interest to provide complete and accurate information so that your doctor is best able to do his or her job. Otherwise, with incorrect or incomplete knowledge of your medical history, your doctor might unknowingly prescribe a drug with a side effect that does more harm to you than good.
Over time, clients’ plans change, and they may make adjustments themselves. If you don’t have visibility into such changes, there’s no way you’re able to react appropriately and help them achieve their goals.
With visibility into your clients’ portfolios and overall asset allocation, you’re able to make changes to the assets you manage, balance out their complete portfolios and ensure that they are on track to meet their goals.
In next month’s email, we will detail the means by which you’re able to obtain insight into your clients’ total wealth.
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