Keys to success as a financial advisor. It is extremely common that any one investor might have one stock that is greater than, say, 10% of their portfolio. This can be the company they worked for over decades. This could be something inherited from a relative that has passed. It could be that they bought it and it just went up in value over the years. They came to the advisor struggling with what to do with that stock.

This book is my attempt to tell you what I have learned about retaining clients in the combination of wealth and portfolio management. There are tons of books whose goal is to help you find new clients. There are plenty of others who will give magical approaches to portfolio management. I wanted to help you keep the clients you have because if you can hold on to them finding new clients is just a healthy extension by simply picking up referrals along the way, and then you can hold on to them, too. Here are five concise points that will guide you.

1. Question conventional wisdom. While Modern Portfolio Theory is useful, its present form is not. There are four asset classes that meet the traditional definition of Modern Portfolio Theory: Stocks, bonds real estate and cash. There are public and private versions of three of them. This is hard, perhaps impossible to put on a two-dimensional chart looking for an optimal combination that shows an optimal mix. For the retail investor, taxes play such a huge part in the calculus. Don’t fall in line with the marketers, either the big bank executives or their allies in asset management. Think for yourself.
2. Fees matter. Taxes matter even more. The popular narrative from the big discounters with millions in advertising dollars is that the retail investor can do everything themselves. If they focus on fees, they solve most of their performance problems. This is patently untrue. What is true, though, is that many financial advisors have settled on doing the least amount of continuing education possible. Educate yourself. Make yourself better. This will make the fee question go away. Taxes matter more than fees. I have noticed regularly that those particularly adamant that they can do everything on their own haven’t the slightest realization that the tax question is more important than the fee question. Force people to look at their tax returns. Educate them on what taxes mean to their overall wealth.
3. Don’t try to be a one-stop-shop. Throughout my career, every iteration of the banks I have worked for has tried to expand their offerings into insurance and mortgage loans, because they are profitable to the bank. They have hired countless specialists to help their financial advisors do this business. The results have been mediocre. Financial advisor culture doesn’t lend itself to selling insurance and doesn’t include enough offerings. Insurance agents sell life, disability, long term care; and they are good at it! I have also seen so many disappointments when the bank forces the financial advisor to sell mortgages. Another point of confusion for the public at large around this topic is that everyone from a part time insurance agent to an investment banker is called a financial advisor. This merely confuses the public. The different skill sets shouldn’t merge together. They should get out of each other’s pockets and specialize.
4. Once your clients have assets, they do not need a “financial plan,” they need an asset manager managing multiple income streams, both current and deferred. They need investment advice, but not some all-knowing and all-powerful documents.
5. If the client is charitably inclined, use the tax code’s charitable giving to your advantage. This goes back to my penchant for taxes being a major hindrance to building wealth. This is not to say one should not pay taxes. The tax code, in the interests of the public good, provides the individual investor ways to circumvent paying taxes to the government so long as those funds go to worthy causes. There is an amazing array of causes that are looking for funds. Find one that you like and fund it. Don’t make the government do that. This will provide you tax breaks.

The manager that first hired me into this business often said that being a financial advisor—full disclosure, back then it was an account executive or a stockbroker—was a lousy job (at times) but a great career. I echo these comments. The amount of value you can contribute to clients in your financial advisor role is only perhaps matched by their doctor. You can be a godsend to their family. You are often their most trusted advisor. Use this opportunity to improve lives and our society. Do not waste it!