The Adviser of the future

Aug 09, 2022

Ric Edelman, is the author and founder Edelman Financial Services and Digital Assets Council of Financial Professionals, or DACFP. He shares his views on the future of advice and the adviser of the future.

There are three things that advisers should be delivering to their clients.

  1. Where are you right now?

Too often, people have no idea about what's going on with their personal finances. It's a mess. It's befuddlement. Clarify. Consolidate. Condense. Start with a comprehensive personal finance perspective. Look at every aspect of personal finance: income, expenses, assets, loans, cash flows, Will, employee benefits, homeownership, and mortgages. Intergenerational family issues are also a big part of that.

  1. Where do you want to go?

Most people are floundering because they don't have real direction in life. They're so busy doing what they're doing, trying to get through the day, they haven't bothered to look up. So help identify the point to all this. What are you trying to accomplish and why? What's going to make you happy? What's going to bring happiness to your life and that of your family?

  1. How are you going to get there?

How do we get from here to there? The mapping out of the plan is exactly what an adviser must deliver. But, can only do so after going through the above two steps.

When I go to the doctor, I say, “It hurts when I go like this.” The fact is that he is going to go through a whole bunch of tests and examinations and do all this stuff that he does behind the scenes. The patient could not care less about. The patient just wants to know what to do when it hurts and how to rectify that.

That's the way most individuals feel about their personal finances. They don't want to become an expert. That's why they are hiring you. Make it simple, make it easy, make it quick, and if you can, make it interesting and entertaining at the same time. That's all investors want.

Managing money is easy. Managing clients is hard.

We're talking about humans. This isn't about money. This is about people. We know how to manage money. Wall Street has figured that out for decades. Thanks to Harry Markowitz and a dozen others, we all know how to manage money effectively.

Managing money is easy. Managing clients is hard. Getting people to do it and to stick with it is really hard. Because we are creatures of emotion, not creatures of intellect. We make decisions based on feelings, not thinking. And we're our own worst enemy.

So, it's the hand-holding and the guidance that advisers provide. And that's not a traditional source of training. That's not traditionally what attracts people into the industry. Historically, people got into the business because they love numbers, and they love money, and they want to pay attention to numbers so they can make a lot of money. And they don't really pay attention to risk or people's attitudes about risk, and they don't care about things that aren't directly related to stock prices moving up. They don't want to pay any attention to employee benefits or credit and debt or the emotional toll that a family is experiencing because of a child with a substance abuse problem or a spendthrift problem or a bad marriage with a son-in-law or who knows what. All those seem to be too cumbersome and annoying and distracting. And it's got nothing to do with today's market.

There's more to life than money, and it's not all about the investing conversation. It's about everything else going on in the family's life.

That's the adviser of the future.

The above has been taken from Ric Edelman’s conversation with Jeff Ptak and Christine Benz of Morningstar. Christine is director of personal finance, and Jeff is chief ratings officer.

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