TheStreet Pro's Wealth Advisor Letter: 8 Timeless Principles
These eight principles are fundamental to the business of managing other peoples' money.
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If I weren’t constantly reminded of things I already knew, I probably would be living under a bridge today.
Money managers only “make it” if they repeatedly remind themselves of certain fundamental principles. Many of these were taught to us by our parents.
Today, I’m going to remind you of eight timeless principles.
These are critical if you want to run a successful investment business.
If you read these and think, “I know this,” then great! At the end of the article, I’ll give you a small but powerful challenge that helps me stay on track when I feel off my game. And, of course, this always grows assets under management.
But first, be bullish on the wealth advice business!
The industry will continue to attract new technologies that seek to systematize every repetitive task that can be automated. Artificial intelligence will creep into the industry and ultimately will dominate.
But don’t get confused by the noise!
This does not apply to the most important part of your business. People will always crave human connection, no matter what new technology is invented.
Unless the human brain is entirely replaced by a computer chip, we will always want a sharp professional to ensure the plan is correct.
So, be bullish on the future of wealth advice. Here’s why…
- People will always crave human connection.
- Your clients want individualized advice.
- Investment opportunities will always exist because of technology and innovation.
- Independent and unbiased advisors offer a unique viewpoint that can adapt to change.
- Investors want to sleep peacefully and a good advisor can help them manage emotions.
- Time is valuable and a good advisor saves clients time while improving their results and, more importantly, reducing costly mistakes!
- Successful investors need to coordinate specialized advisors for different aspects of their wealth. Attorneys, CPAs, and insurance agents rarely give great advice without being aligned to the big vision that a client wants. Only a great wealth advisor can do this well.
The advisor provides the big picture beyond numbers, laws, and tax codes. They combine economics and relationships into the equation with a holistic vantage point.
8 timeless principles for a healthy wealth advisory business.
OK, now that you agree with me that the business is bullish over the long term, let’s get into the 8 principles.
Principle 1: Leadership attracts quality clients.
How would you change your business if you were only paid based on your results for your client?
This defines your leadership roadmap.
Clients crave leadership and direction from their advisors. Most people are skeptical when they first talk to an advisor. They need a clear path that will help them see the results.
Principle 2: The golden rule is the best business strategy on the planet.
Allow me to state the obvious. Treat your client as you want to be treated. Don’t do something that you wouldn’t want if you were a client. That’s it. This is your secret weapon that will multiply client happiness and referrals.
Principle 3: A genuine connection leads to a long-term client relationship
Build a real connection with each client. It’s just as important to know when a client is wrong for you or your business. Listen to your gut. Problem clients will drain time and energy because you will either fire them, or they will leave.
Principle 4: Don’t always tell a client what they want to hear
Clients may push for a quick fix when it comes to money, but it’s our responsibility to stay grounded in logic and facts. We must be truthful in a polite way, guiding clients toward smarter financial decisions—even when it’s not what they want to hear. They will thank you in the end.
Principle 5: Avoid an unpleasant experience
Whenever a client has an unpleasant experience, always assume they will think it’s your fault. And, usually, it is! You probably could have done something to help them avoid it!
Everything runs smoothly when we properly manage client expectations around market volatility, taxes, and timeliness of service.
Principle 6: Recognize noise when you see it
In the financial services industry, there’s always some new “must-have” technology or product being pitched. They’re supposed to be game-changers, but rarely are.
Concentrate on activities that give results, rather than on chasing distracting new trends. Focus on your core services. It’s not just about giving good advice; it’s about executing advice flawlessly.
Even the best shiny object is worthless if it can’t be implemented smoothly.
Principle 7: Don’t forget the free lunch
Don’t build one-trick pony portfolios that only make money when the stock market is rising. Build diversified portfolios and keep costs low while you pursue excellent returns. You should seek investments that are truly non-correlated, which may mean non-traditional strategies and asset classes.
Principle 8: Invest with a philosophy that you believe
Every successful advisor will eventually become a philosopher, so you might as well embrace it. The best belief systems are rooted in evidence and experience. Study history and keep detailed records to see what does and doesn’t work. If you can’t explain your philosophy to a 7th grader, it probably doesn’t work.
A small but powerful challenge…
I stay on track when I remind myself about what I already know. I do this by asking myself pointed questions. Here are a few that can help any wealth advisory firm build more revenue:
1. How can we be better leaders for our clients? What improvements can we make to guide our clients with confidence?
2. What changes to our service would I personally like to see if I were a client?
3. What types of clients do we have a natural connection with, and how can we connect with them more often?
4. How do we help clients avoid temptations that can hurt their finances?
5. What are the most common things that make a client unhappy? What could we do to manage client expectations?
6. What projects and tasks are distractions that keep us from doing the things that deliver a better outcome for clients? How do we ditch these bad projects?
7. What systems can we put in place to make sure we are properly diversified and keep costs down?
8. What investment philosophy do we truly believe in based on practical experience and historical evidence? How do we communicate and execute this well?
There you have it, the 8 principles for a thriving wealth advisory business based on my experience. What are the principles you find the most enduring? I’d love to hear your comments and follow for more.
