Is it easy to see the value your wealth management professionals are adding?
Most would instinctively say yes, especially when the market has been on the rise.
When the market is going up, it is expected that wealth management professionals report and take credit for portfolio gains. However, when the market hits a turbulent stretch, having proper guidance is a fundamental way your advisors can help protect and grow your wealth, even though immediate results may not look great.
Although the good times usually outweigh the bad, there are bound to be some choppy waters along the way. Negative emotions are proven to be a lot stronger than positive ones, so when turbulent times arise, proper advice can help reign in those negative emotions and prevent knee-jerk reactions.
According to a recent study conducted by JD Power, less people feel that they can trust their advisors this year compared to last. These individuals feel that advisors are not taking the time to educate and explain things thoroughly enough. This leads people to feel displeased by the returns their portfolios are generating, and creates distrust in the client/advisor relationship.
For the first time since 2008 customer satisfaction has decreased. According to the aforementioned survey, it now sits at 778 (on a 1000 point scale).
Those with investable assets of $500,000+ were the ones that felt the most under served. Customer satisfaction of these individuals has dropped 38 points year over year (roughly 4%).
For those who are feeling under-served and disappointed by their returns, there are a few alternatives.
One alternative is to start do-it-yourself investing. Sounds like a viable option for those that know what they are doing, right? However, only one in 10 Canadians feel comfortable investing on their own.
Even though only 10% of investors said they felt comfortable investing on their own, 2 out of 10 currently do it. This goes to show that even though people do not feel comfortable doing it, they distrust their financial professionals enough to step out of their comfort zone and try it anyway.
Although some of the distrust is merited, there are financial professionals out there that can be trusted. Some financial professionals have a legal obligation, called a “Fiduciary Duty“, to put the clients interest first.
One group of financial professionals that are fiduciaries, is Certified Financial Planners (CFP). All CFP’s must put the interest of the client above their own interests.
Although not all professionals have a fiduciary duty, they are not all bad. Many of the regulatory bodies overseeing wealth management professionals have rules and consequences in place to guide their advisors in doing what is in the clients best interest.
A large portion of trust is also determined on the personal relationship built between the investor and advisor. For this reason, it is crucial that investors and advisors sit down to meet annually, at the very least.
Regardless if portfolio performance has been good or bad, these conversations are important. The advisor should take time to explain why the portfolio has gone up or down, chart a plan moving forward, reassess client comfort level and understanding, and determine if any changes are required.
This guidance can go a long way on its own, but as the investor, don’t be scared to ask questions in order to gain a clearer understanding. The advisors job is to help you understand your financial future, and if they cannot do that… maybe its time to look elsewhere.
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Disclaimer: This Forbes Wealth Blog is for informational purposes only and does not constitute financial, legal, or tax advice of any kind. Please consult your legal, accounting, tax, investment, banking, and life insurance professionals to get precise advice relating to your particular situation before acting upon any strategy.
https://canada.jdpower.com/resource/canadian-full-service-investor-satisfaction-study
