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A go-to approach for meeting client expectations

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Adviser Amy Cady recently took an evening drive to an elderly client’s assisted-living residence to pick her up and take her out to dinner.

“She’s 80 and walks with difficulty,” says Cady, managing director of a Wells Fargo Advisors office in Bartlesville, Oklahoma. “But what I got out of that visit was worth the effort. It makes her and her family feel safe with me.”

"I would do this with my clients anyway," she adds. "Because I have this relationship with them, I get referrals. This woman has referred me to her friends and the nurses, for instance. I don’t ever have to market myself.”

Cultivating a personal, out-of-the-office relationship with a client is just one example of the holistic planning approach, which has been steadily gaining popularity in wealth management for over a decade. A recent PricewaterhouseCoopers study suggests that it is also becoming the go-to approach for meeting client expectations.

The report — “2016 Wealth Management Trends: A revolution both loud and quiet” — found that clients want more personal, real-time and effortless interactions with their advisers. Clients are also less tolerant of "historic pain points, such as processes they consider complicated, time-consuming and risky."

"The next wave of advice automation will go well beyond asset allocation, to holistic financial planning," write PricewaterhouseCoopers’ wealth management experts Michael Spellacy, a principal at the firm, and Arjun Patel, a consulting practice director.

They add that “client expectations about the scope of advice are broadening to include liabilities, tax and estate planning, insurance needs, health care policies, assistance with budgeting and spending controls, and income generation."

Spellacy says that, in the wealth management space, demand from new clients for holistic planning services has been growing rapidly, from virtually zero a decade ago to 60% of new clients this year.

It’s a “fundamental realignment,” he says, and it should continue to accelerate.

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Another study by equity research firm Riedel Research finds that 83% of what clients think is important involves work and spending decisions, while only 17% think saving and investing should take precedence.

“When I started out in this business working at a bank,” recalls Cady, “we were basically stockbrokers, and more transactionally focused. But I kept running into clients who had issues like an aged parent or special-needs child to care for, and I learned that I needed to know about things like local services that are available, not just answers to investment questions.”

Cady says that, while she has taken a holistic approach since 2002, it took her clients a bit more time to embrace the strategy. By 2006, when her AUM was $100 million, half of her clients said they wanted holistic advising. By 2011, it had risen to 65%, and by 2013, 80% of her clients desired this form of planning.

Today, with $350 million in AUM, she says, “85% of my clients receive this type of holistic advisory treatment.”

She adds, “I give the holistic approach to advising 100% credit for the growth of my practice over the past 10 years.”

Dave Leland, a 35-year veteran adviser who heads an eight-member team at Merrill Lynch's wealth management office in Beverly, Massachusetts, says that about 50% of his job is giving traditional financial advice, and the rest is holistic.

“Just the other day, I had a client call late in the day urgently wanting to talk,” he says. “I thought it must be a health issue, but he said he was about to retire and wanted to buy a $40,000 motor home. It was clearly important to him, so I looked over his budget and assured him he could handle it.”

Leland reports that, whereas five years ago, only 50% of new clients in his practice wanted a holistic-planning approach, it increased to 75% three years ago. “Now we are doing this holistic advising for 100% of new relationships,” he says.

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He adds, “I tell our people there are no stupid questions. Whatever it is the clients bring, let’s discuss it and solve it. That’s the future of this industry: holistic advising. And people are going to need to make changes to fit that model.”

Raymond James & Associates President Tash Elwyn agrees. While Elwyn says his firm has always embraced holistic advising, he concedes that even they are still evolving.

“It’s fair to say there have been two fairly recent pivotal moments that have facilitated this comprehensive approach to financial planning being adopted by a majority of our advisers,” he says. “The first was in 2012, when we introduced the financial planning software Goal Planning & Monitoring, adapted for our platform.”

This tool, he explains, is designed to ensure that “any quality-of-life item be addressed.”

The second moment came in 2014, when his firm began a collaboration with MIT’s Age Lab, a relationship he says has been “a catalyst to build the resources necessary to educate and enable FAs and their clients to plan in a more holistic manner.”

Isabella Cagnazzo Fonseca, a senior member of Aite Group’s wealth management team, says going holistic means moving away from sales practices and commoditization of fees, products and services, where the wirehouses have focused.

She says for wirehouses, the greatest challenge in providing holistic advice is to develop “tech platforms that are tailored to both advisers and their clients,” which requires approval from back offices, and can take time and effort.

This may explain why, according to Cerulli data, only 23% of wirehouse advisers in 2015 were financial planners, compared to 28% at national and regional broker dealers, 47% at independent broker dealers, and 34% and 37%, respectively, at independent and hybrid RIAs.

Dan Richards, founder of Client Insights and a member of the faculty of University of Toronto’s MBA program, notes that some firms, such as Merrill Lynch, are at least making progress toward advising that goes well beyond simply offering investment strategies.

“Large organizations are inherently resistant to change,” he says. “But once a big organization makes a move, they can move very quickly.”

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Comprehensive-Planning Couple

Kim and Dennis Briggs, a married team of Raymond James advisers located in Clearwater, Florida, have certainly taken the idea of what they call “comprehensive financial planning” to heart.

“It’s the core of our approach with our clients.” says Kim. “Figuring out what your clients’ goals and hopes are, and what their preferences are, is the art. The science is when we identify what current and future resources are, and put that together with their goals so they can live the way they want to live.”

“People never come in and say they want a comprehensive financial plan for their life,” Dennis says. “Never! We have to ease them into doing that.”

Rather, he says, what might happen is a client comes in and says they want to buy a summer home up North, where they have family. “And we may have to say, ‘Okay. Where are you going to take that money from? Because you don’t have the money to do that.’”

He says he’ll then explain all the costs involved in owning a home that will be used, at most, several months a year. Then he’ll break that down to the cost per day, and point out that the couple could do better renting each summer, “or even perhaps staying at a Ritz-Carlton.”

“We find that a lot of the problems people bring us are emotional, and sometimes it can even be that they’re not spending enough,” he says.

To which Kim adds, “A lot of the solutions are common sense. We are kind of a conscience for our clients.”

Kim says she and her husband began making comprehensive financial planning a centerpiece of their approach to advising in 1999, when Dennis earned his CFP. By 2006, a decade ago, about 60% of new assets were from clients who wanted such holistic planning. By 2011 it was 62%, and in 2013, 70%.

Today, she says, 73% of new client assets — $10.5 million out of $14.4 million — belong to their comprehensive planning clients, with the rest coming from established clients not interested in that type of advice.

The Briggs say that, these days, only about 10% of their planning sessions with clients involve managing their investments. Much of the rest of the time they give advice that can’t easily be monetized.

But, says Dennis, “We’re well-compensated, and our referrals are great. Also the job’s a lot more fun and fulfilling than my E.F. Hutton days, when we were just selling bonds.”

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