June 8, 2010
- Consider outsourcing. Fortigent was recently retained by Moss Adams Wealth Advisors LLC, the wealth management division of Moss Adams LLP to complement its in-house investment research capabilities “All advisors have some level of research capabilities or expertise in one area, but often, rather than staff up or push current staff to get up to speed on a new market segment, they choose to supplement their capabilities with our firm’s research,” says Welch. “Typically advisors want access to all 175 managers on our platform and ask us to conduct a number of proprietary searches. For instance, they could be looking for an emerging markets fund with an emphasis on technology or small-cap exposure.”
Communicate more with clients. In today’s shattered trust environment, clients don’t know what to believe, who to trust, and are skeptical about advice, says Chip Roame, Managing Principal, Tiburon Strategic Advisors, Tiburon, California. “Clients historically have generally not cared to engage in the due diligence process, but today advisors can benefit from communicating more of their selection process to clients, even if they do not understand it,” he says.
Sue Stevens, CFP®, CPA, CFA, president of Stevens Welath Management Deerfield, Illinois, agrees. “In this period of heightened anxiety, more than ever our role as an advisor is to calm clients by providing information that puts market events in context.” To that end, Stevens has begun sharing more of her strategic thinking with clients. “I might discuss how much we’ve moved to cash and why or the role of international bonds,” she notes. “Where clients once might have only glanced at my newsletters, now they are reading them.”
In an effort to keep his clients up-to-date, Rick Kahler, CFP®, President of Kahler Finanical Group in Rapid City, South Dakota, posts details of visits to the fund companies he uses on his website. For example, he recently wrote, "Last week and this week I spent a day at the offices of American Century, Kansas City, and AQR, Chicago, meeting with their portfolio managers. I gained a number of insights into their projections for the economy, strategies they are implementing, and the philosophy behind some of their funds. I have planned several other trips in the near future to visit with other fund managers that we also use in implementing our investment strategy.”
“I want clients to understand and appreciate our due diligence commitment and the time we take to ensure we are using the most effective managers possible in implementing our portfolio asset allocations,” Kahler says.
Although historically viewed as an expense secondary in importance to revenue-producing activities, clients’ current insistence on transparency increasingly is transforming due diligence into a way to build and enhance trust and differentiate a firm. “Advisors who are unwilling or unable to conduct appropriate levels of due diligence will, at best, find themselves at an extreme competitive disadvantage,” Welch concludes. “At worst, they will find themselves out of business.”
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