Better Goals-Based Tools Help Wealth Managers Keep The Wheels Rolling

Published by Craig Iskowitz, CEO and Founder of Ezra Group, LLC
November 18th, 2015

Goals-based wealth management is not about re-inventing the wheel. It is about helping to align the different wheelsCar_1 of a client’s holistic financial plan so they roll smoothly throughout a client’s or a family’s financial journey.

Traditional wealth management, where advisors gauge success by beating a benchmark, usually focuses on one wheel of a client’s financial plan. If the other wheels are under inflated or poorly aligned, that’s of little concern to a traditional wealth management advisor. The financial market crash of 2008 showed how poorly this approach worked for clients.

That’s why goals-based wealth management (GBWM) is gaining traction with advisors. But in order to be successful, a GBWM approach must be supported by flexible, integrated technology to better support clients’ changing financial needs throughout their lives.

Insights Through Data Aggregation

People are complicated. One individual is likely to have multiple relationships and accounts with different financial firms. Each different account type serves a different purpose. And when an advisor broadens a client relationship to an entire household or a family, what was complicated can suddenly grow in complexity to become problematic.

In a GBWM approach, all of this complexity must be taken under consideration. That requires a wide and encompassing sweep of all data within a household’s financial picture.

But gathering data is just the first step—making sense of the information is where advisors find insights and knowledge that form the basis for goals-based solutions. That’s where data aggregation becomes critical.

Some advisory industry professionals think data aggregation is the most valuable component of an advisory Frank_2platform. Frank T. Troise, Senior Vice President at Infinity Partners, see benefits for both advisors and clients in data aggregation.

“From an advisor perspective, they want as much functionality as possible at the lowest price,” Troise says. “From a client perspective, they want 24/7 access to that software. In both cases, data aggregation is a crucial feature.”

When it comes to GBWM, it’s not just financial assets that are included within its scope. In many approaches, non-financial and illiquid assets would fall under consideration. So would human capital—the economic value of the education, experience and skill sets in a household. This would include salaries and benefits of individual wage earners, but also stock options and business ownership plans that are commonly used as incentives for entrepreneurs and start-ups.

Under a traditional wealth management approach, this non-financial information wouldn’t be considered. Most traditional wealth management platforms wouldn’t capture this data either. A goals-based plan that doesn’t consider this information would be considered full of holes, a patchwork of advice rather than a comprehensive solution.

Integration, Not Separation

There are enough tools in the marketplace to help advisors do all of the tasks that are familiar in a wealth management practice—client profiling, risk assessment, asset allocation, reporting and more. A goals-based Cheryl_3approach requires these tools to integrate and communicate with each other. Quite often that can be a challenge.

“GBWM is exceedingly more comprehensive and holistic, but also complex,” writes Cheryl Nash, president of investment services at Fiserv, in Investment News. “It requires cohesive, seamless and simple component delivery—elegantly bringing together what is now chaotically separate.”

For the most part, these tools haven’t been engineered to work together. It’s almost as if they were designed for a different set of standards, and in a sense that is true. These tools work well in a traditional wealth management approach, where measurement against a benchmark was the standard. In a goals-based system where the standards can change from client to client, depending on their individual goals, the tools need to be more adaptable and collaborative in order to help an advisor fulfill the client’s need.

For example, creating different risk profiles for different client goals is easy enough—advisors do this all the time when working with a range of different individuals. The challenge comes in integrating these different risk profiles so an advisor can see them all together to evaluate them properly and make investment recommendations.

Also, a client would want to see the whole picture when reviewing their goals-based plan with an advisor. So any platform used by an advisor in a GBWM approach will need to integrate different views of their progress. Integration, not separation, is the key to successful GBWM.

A Flexible Client Experience

Clients and advisors interact in many different ways. Clients are likely get information about the state of their Split_4finances through multiple electronic devices as well as old-fashioned print statements and face-to-face meetings with their advisor.

Investors prefer multiple modes of communication about their financial goals. In a Wells Fargo survey, 71 percent of investors said online access to investing tools in important. But when asked to rank the importance of different sources of investment information, interaction with their personal financial advisor came out on top.

Perhaps most significantly, the majority of investors prefer a blended approach between the personal and the digital for receiving investment advice.

So in addition to integrating the tools advisors use for goals-based wealth management, the experience clients receive when they go to each information source should be consistent and integrated as well. This is especially true with goals-based wealth management, where clients will expect to see a consolidated picture of their financial life all in one place.

Big Wheels, Keep On Turning

By shifting the focus of financial planning from beating the market to achieving specific objectives, goals-based Car_2wealth management promises to offer clients a better road to follow throughout their life’s journey.

Advisors are realizing that helping clients with their financial plans isn’t about the destination. Clients place more value on what happens along the way—a smooth ride at a steady pace and the feeling of staying in control at all times.

Tools that are integrated, flexible and insightful will help advisors deliver on the promise of goals-based wealth management and align the wheels of their clients’ financial plans.

 

About the Author: Craig Iskowitz is CEO and founder of Ezra Group, LLC, located in East Brunswick, NJ. Ezra Group is a management consulting firm providing advice to the financial services industry on business and technology strategy, software development, and marketing. Craig has over 20 years of experience in wealth management, retail and institutional brokerage, market data and front and middle office operations. He previously worked for ADP Brokerage Services (now Broadridge Financial) for almost 10 years before becoming a consultant. His clients include many Fortune 500 firms such as The Bank of New York, Fiserv, Standard & Poor’s, and J.P. Morgan Chase. Craig is also the editor and publisher of the Wealth Management Today blog (www.wmtoday.com), which focuses on news and information for the wealth management industry with focus on fee-based advisory platforms. Craig is also available to speak on wealth management trends, participate in industry panels, or present one of his industry classes such as, Managed Accounts 101. Craig can be reached at craig@ezragroupllc.com

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