The financial advice industry is in flux. Clients are increasingly aware of what constitutes quality financial advice and are seeking highly personalised and transparent services. At the same time, new industry standards are driving up compliance costs, putting traditional financial advice models into question. While this has led some firms to exit the industry, others see the changes as an opportunity to evolve their business in order to remain competitive and even boost their profitability.
Financial advice clients are no longer content with jargon-filled investment products that they struggle to understand. Not only that, but they are becoming less likely to be happy with average market returns while being exposed to rising volatility. Instead, they are asking for increased transparency and an advisor who truly understands their financial needs and can match these up with their investments within a comprehensive financial plan.
Thriving advice firms are addressing these challenges through goals based investing; a client-focused practice that seeks to uncover each client’s individual financial goals. The adviser then constructs an appropriate asset allocation that is designed to attain the target return required to meet each goal within a set timeframe. The strategy goes beyond a static risk-based strategic asset allocation, but instead engages active asset management across a range of uncorrelated alternative investments, as well as various strategies to ensure return targets are met with minimal volatility.
Advisors often report superior client outcomes and satisfaction when applying a goals based investing strategy, which fosters greater retention and referrals; however, its successful implementation requires sufficient time and resources to research and maintain appropriate investments, particularly in light of their active nature. At the same time, advisors report that it is becoming increasingly difficult to accommodate ever-increasing compliance obligations and sustain an efficient and cost-effective business.
As such, prudent advice firms often decide to outsource the investment function of their business to an active asset manager. This ensures that invested funds are managed appropriately to meet client goals and frees up the advisor’s time to focus on delivering on their key strengths, including building solid client relationships and scaling up their business.
This is often accomplished through a managed discretionary account structure, which additionally saves on paperwork. It is also a great fit for a goals based investing strategy, since it affords the asset manager the flexibility to employ active asset allocation and, at the same time, allows the advisor to efficiently tailor each client’s investment plan to meet their individual goals. Furthermore, managed discretionary accounts are fully transparent and tax efficient.
To find out how you can future proof your advice firm to be customer-focused, scalable and most importantly, profitable, contact Dynamic Asset today.
