Smart Ways To Cater To Savvy Investment Clients

September 5, 2014
Financial adviser Joseph P. Okaly uses his calculator to make a point in his Florham Park, N.J., office.

Financial adviser Joseph P. Okaly uses his calculator to make a point in his Florham Park, N.J., office. View Enlarged Image

Special Report: Financial Advisers' Guide — Making Connections

Active stock investor Joseph Pankus of Lake Geneva, Wis., creates his own algorithms for picking stocks and ETFs in the portfolio he manages. He also uses two investment advisers to handle his other two stock portfolios. But he doesn't use broad-based financial advisers.

Investment adviser Christopher Carosa handles his own financial planning and manages his own stock portfolio. To add to his knowledge, he uses a stable of specialists — an accountant, a lawyer, an insurance broker and a banker — for his specific financial needs. "Based on my experience, I am asking far more detailed questions than the typical user of financial services," said Carosa, of Mendon, N.Y.

And evidently, these hands-on types aren't unique in their views about financial advisers. Talks with a range of savvy investors — who often manage at least some of their investment portfolios themselves — reveal a distinct preference. Instead of employing comprehensive financial advisory/financial services firms, many savvy investors prefer using specialists, such as accountants for taxation and attorneys for estate planning.

"You have to have some specialists. I don't think one guy can handle all the areas of financial services people need," said retiree Pankus, a former top executive at several companies.

In addition, many active investors expect collaboration between themselves and specialists on decisions, experts say. And ideally, they want them working as a team on their behalf, while they — the clients — serve as point-person.

In turn, some sophisticated investors feel equipped to do their own broad financial planning. For instance, given his family's assets, Henry Crutcher, CEO of Equities Lab, a financial software company in Atlanta, doesn't need planning and budgeting "to precision."

Crutcher says his stock market expertise — he manages several personal portfolios — affords him the confidence to oversee his finances.

"Understanding the equities market helps demystify the whole financial arena," said Crutcher, who uses his company's software to pick shares.

But evidently, the financial advisory sector has a different take. To that group, sophisticated investors can benefit from even broad financial planning. "You don't know what you don't know. It's important to recognize that we all have (knowledge) gaps," said Janet Stanzak, president of the Financial Planning Association.

Changing Titles

Indeed, 2013 data from the FPA show that more advisers and planners expect to change their professional titles to "wealth manager" — a move which, some experts say, often implies offering expanded, umbrellalike financial services.

But whether the switch will matter to savvy clients remains unclear. For now, some active investors are stressing the need for quality. Since they're often hiring specialists, they want them staying at the top of their game, keeping abreast of trends and putting clients' needs first.

Pankus describes how investment advisers should serve clients.

"They should have strategies that both protect capital and ease the financial pain from major market corrections," Pankus said. Particularly for retirees, advisers, besides seeking stocks paying dividends, "should be well-versed in creating additional cash flow through various option strategies, such as covered call premiums, which can boost a portfolio's returns by 2% to to 4.5%."

Pankus acknowledges that "many of today's financial advisers, or wealth managers, are adding financial services for clients." While this practice may "generate more revenue per client," the different services would need to be considered separately, and ideally, by experts in specific areas. The implication for wealth managers: They'd need either to have the expertise in-house or get it from consultants.

For her part, Kay Meyers of Mukilteo, Wash., who holds properties and securities, wants an adviser who's attuned to her needs. That person should appreciate her grasp of the markets and confer with her on major decisions.

No Interaction, Please

Meyers searched for just such an adviser for over a decade before finding one two years ago in Seattle. But along the way, she waded through a slew of candidates who were mainly interested in boosting their assets under management.

She recalls one adviser telling her, "We don't want to sit and talk to you." To Meyers, that meant, "We want your money, but we don't want to interact with you."

However, for those seeking more such give-and-take with an adviser, there's evidently good news. Michael Foy, wealth management practice director at J.D. Power & Associates, sees "a movement toward more collaboration" between clients and their advisers on investment decisions.

Why? "People want to be more involved because of certain distrust" emanating from the (2008) stock market crash. At the same time, people also have "more information at their disposal" to help guide decisions.

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