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Are You Busy, or Are You Productive? by Rick Wedell

August 16, 2021

This article is featured in the 2021 Mid-Year Outlook.

All too often in this industry, Advisors are focused on things OTHER than creating value for themselves (and ultimately for their clients).  The confuse being busy with doing the work necessary to grow their practice and create enterprise value for themselves and their families.

There’s one thing in this business that generates value for Advisors, and that is the relationship that they develop with their clients.  That’s it.  This is, fundamentally, the core of everything that we do in the industry.  Clients pay fees due to the depth of that relationship.  Clients make referrals based on their satisfaction with the services we provide.  And anything that an Advisor does that is not focused on strengthening those client relationships and developing new ones is, fundamentally, something that’s not core.

That includes investment management.  Study after study has shown that individual security selection and active portfolio management is NOT how clients benefit from working with a Financial Advisor[1], and yet I cannot tell you how many Advisors spin their wheels, day after day, researching mutual fund managers, or stocks, or ETF’s, trying to come up with the best lineup of funds to offer their clients.  They trade and they opine, and they confuse investment management with the business of being a Financial Advisor.

Our clients pay us for investment advice – HOWEVER, no one ever said that we must be the sole expert that provides that advice. Look at it this way – if a client came to you for estate planning, would you duck off to law school so that you could write their will yourself? Or would you refer that business to a reputable attorney and work with them in tandem to develop the will?

Why should investment management be any different?  Large firms have figured this out – they almost always have someone who specializes in investments while everyone else focuses client relationship.  There’s value in that.  The specialist is seen as an expert, and the rest of the firm doesn’t waste their time on an activity that doesn’t really generate any value for the firm.  The client feels better served knowing they have a relationship manager AND an investment expert working on their team.

Why should Advisors and smaller RIAs be any different?  I’m not talking about handing her investment management to a faceless manager thousands of miles away or investing in a model portfolio.  These products are sold by every other Advisor in the business, and they have become little more than a commodity.  Clients DO expect someone on the team to be an expert – after all, they are paying for investment advice!

An Outsourced CIO who handles investment management, including client interactions can leverage an Advisor’s time. A team that can be at in person meetings with prospects and clients, whenever she wants them.  A team that makes phone calls when clients get jittery and provides marketing events and support business growth.  A team with the background and presence to add value in the eyes of clients instead of simply checking the investment box.

So next time you spend the majority of your day in front of your Bloomberg screen researching client investments, pause and ask yourself if you are busy being busy or if you are busy building a valuable business.

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Securities offered by Registered Representatives of Private Client Services (“PCS”). Member FINRA/SIPC. Advisory services offered by Investment Advisory Representatives of RFG Advisory, a registered investment advisor. Private Client Services and RFG Advisory are unaffiliated entities.

[1] See, for one example, “Putting a Value on Your Value:  Quantifying Vanguard’s Advisor Alpha” by Kinniry et. al., Vanguard Research, February 2019