New Year's Resolutions for Financial Advisors

John Diehl   |  Mon Jan 04 14:00:00 EST 2016

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At Hartford Funds, we recently conducted a survey that looked at what life experiences investors had gone through in 2015, as well as to gauge their expectations for their finances in this new year. There were several takeaways that I found to be particularly informative, and I believe that their implications might be useful to financial advisors as we kick off 2016. Pay attention, financial advisors, and think about adding one (or all) of these to your list of New Year’s resolutions, so that you can serve your clients even better.

Key Takeaway: The multi-generational household is on the rise
In response to what major change investors experienced in 2015 and expect to experience in 2016, respondents over the age of 45 widely cited both having an aging parent move in with them or having an adult child move back home. A whopping 61% of respondents 45 or older experienced a child moving back home in 2015, and 47% expect a child to move home in 2016. Twenty-six percent of respondents aged 45-59 experienced an aging parent moving in with them in 2015, and 31% anticipate dealing with this in 2016.

New Year’s Resolution: To better help them plan carefully, I will make efforts to be more aware of my clients’ family situation.
Given this data, the importance of being personally connected to your clients is underscored, so that you can better help those in this particular situation be financially prepared to take in an aging parent or grown child. As we pointed out in a previous post, caring for a parent in the home can have a number of costs, including fringe expenses from taking the parent to appointments and more substantial expenses, such as modifying the home to be more accessible for those aging parents with mobility constraints. The same goes for welcoming back an adult-aged child—whether they are single or come with a spouse and their own children, more bodies in the household inevitably means more expenses.

Financial advisors might be wise to take the time to ask about their clients’ families, checking in to see whether one of these scenarios might happen in 2016 or has already happened. Having this information means offering your clients better, more relevant advice and also shows your clients that you are aware of their unique needs and able to work with them accordingly.

Key Takeaway: Fear is an inherent by-product of investing.
Despite all of the media flurry around the Fed raising interest rates and the stock market volatility in 2015, the number one response to what external factor would have the greatest impact on personal finances was “events around the world impacting the global economy.” What strikes me as interesting is that we conducted this survey in mid-November—right around the time of the Paris attacks on November 13. We all know that correlation does not mean causation, but I do wonder whether respondents were swayed by the fact that this crisis was likely a top news story for the duration of this survey.

New Year’s Resolution: I will provide my clients with relevant and rational investment guidance, especially when fear strikes them.
Whatever the reason for global events being the greatest fear among investors, the point is that fear is always present and top of mind for investors. It is crucial that advisors understand what is on their client’s agendas, in terms of addressing their concerns relating to financial matters. It is that agenda that drives emotional, rather than rational, investment decisions. Being able to put such events in perspective or address concerns in a diplomatic, calm and proactive manner will be key in this scenario.

When all of the news seems like bad news, it will be important for financial advisors to be the calm in the storm for their clients. Talk to them about positive current events, focus on the future, share resources with them and be proactive in reaching out to them, especially in uncertain times that have the potential to incite further fear and anxieties.

Key Takeaway: Despite the concerns, investor optimism reigns.
Forty-seven percent of people that we surveyed expect that life events will impact their finances in 2016, in addition to the financial impact of global events and stock market volatility. Nonetheless, Americans remain rather optimistic about their finances for 2016, with 54% saying they are very or somewhat confident about their investments and only 14% anticipating that their financial situation will become worse in the next 12 months.

New Year’s Resolution: I will look at my clients’ big picture, rather than just the numbers.
While the survey shows that investors are feeling optimistic about their financial future, financial advisors should be one step ahead of them, making sure that their clients do not let their confidence cloud their judgment, but also working with their clients to maximize their portfolio and returns. Financial advisors should be mindful to present a balanced view of both optimistic opportunities as well as rational concerns in addressing portfolio construction, and those views should go beyond just investment advice to provide valuable insight on lifestyle issues as well.

For example, there is significant opportunity for advisors to talk with their clients about potentially taking on greater risk or to identify strategies to keep financial burdens in check, depending on what is most suitable to each client’s needs, goals and life situation. But before that can be done, the advisor needs to know their clients well, from who lives in their household to what their financial fears are to what financial goals they want to reach. In doing so, advisors can help their clients have more reason to be optimistic about the future.
 

What all of these data points and their implications tell us is that now, more than ever, financial advisors need to invest time in their clients, getting to know the details of their lives so that they can in turn offer empathetic and relevant financial guidance. It is not just about investment performance alone. It is about listening, hearing and reacting—that is the new value of advice. What better time to start than at the beginning of a brand new year?

John Diehl

John Diehl  

CFP®, CLU®, ChFC®
Senior Vice President, Strategic Markets Hartford Funds


John Diehl is senior vice president of Strategic Markets for Hartford Funds. He and his team are responsible for engaging and educating financial advisors and their clients about current and emerging opportunities in the financial-services marketplace. These opportunities range from tactical strategies in areas such as retirement-income planning, investment planning, and charitable planning, to anticipating and preparing for long-term demographic and lifestyle changes. John also oversees Hartford Funds’ relationship with the Massachusetts Institute of Technology AgeLab.

John joined the company in 1988 and was promoted to assistant vice president in 1991 and vice president in 1997. He was named senior vice president in 2007, while he led the Retirement and Wealth Consulting Group, which was responsible for building awareness and knowledge of retirement challenges and the latest planning strategies to address them. In 2012, John was named Senior Vice President, Strategic Markets; in this role, he devotes his efforts to serving the needs of financial advisors and their clients.

John has been widely quoted in consumer and trade publications such as The Wall Street Journal, Financial Planning, and On Wall Street. He has also appeared as a featured guest on CNBC and Bloomberg Television to discuss his views on retirement-related topics.

John attended Moravian College in Bethlehem, Pennsylvania, where he earned a bachelor’s degree in economics. He has been a CERTIFIED FINANCIAL PLANNER™ (CFP®) since 1991. In addition, he holds the Chartered Financial Consultant (ChFC®) and Chartered Life Underwriter (CLU®) designations. He is also FINRA Series 6, 7, 63, and 26 registered and holds a life and variable insurance license.


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