Why the Solo Advisor is a Thing of the Past

Every morning I read financial journals and various news publications to keep abreast of what is happening in the financial services industry, and regardless of the day of week or publication I review, the concept of “holistic wealth management” or “holistic financial planning” continues to emerge as a major subject of discussion.

A recent white paper (https://cdn.advent.com/assets/11rgf5ml/scaling-holistic-financial-planning-paper.pdf ) from SS&C, a technology and investment operations company and, developers of the Black Diamond Wealth Platform, grabbed my attention.? It opens with the following statement:

The wealth manager’s role is evolving, driven by changing client expectations and new business realities. Clients want to have a complete picture of their financial life beyond their investment portfolios so they can make important life decisions. They seek professional guidance to put all the pieces together, particularly for the complexities associated with taxes, retirement income, property ownership, estate planning, and more. At the same time, advisors are looking to provide broader services. Their traditional investment management offering is becoming commoditized, which means they need new ways to differentiate themselves and deliver client value. As a result of these converging interests, the trend toward comprehensive or “holistic” wealth management is accelerating.

While the white paper is fundamentally a pitch for their technology platform as well as their relationship with DPL’s Advent Insurance Marketplace (a fee-only annuity and life platform), it does make many excellent points, which support what I have been saying for years.? The bottom line is that holistic financial planning is far more extensive than just creating a financial plan and providing investment management.? In fact, the day will come soon enough when even the commoditization of these services will not matter, as the opening statement suggests, because Artificial Intelligence will likely replace our role in many of these sorts of tasks.? But will it 100% replace the advisor?? I do not see that happening.

Remember this chart below from the Spectrem Group study from 2021?? It has been floating around and referenced all over the press and social media since then.? I wrote about it back in May of 2022 (https://in4fa.net/the-financial-services-gap-expected-vs-received/ ).

Holistic, to me, absolutely means providing financial planning and investment management services.? BUT what about all of the other services that clients expect that are not being provided?

Was this study the impetus for a more robust conversation about “holistic wealth management”?? Was it a wake-up call for the Financial Planning community to broaden their perspective with respect to the financial wellness of the people they serve?

In early December 2023, The CFP Board Center for Financial Planning hosted the Academic Research Colloquium for Financial Planning in Arlington, VA - my hometown.

Dr. Sonya Lutter, Ph.D., CFP?, LMFT, Professor of Practice, Director of Financial Health and Wellness, Texas Tech University, was to deliver the keynote presentation “based on her research into the relationship between the psychology of financial planning and a holistic planning process that includes risk management as well as wealth accumulation and client outcomes” according to the event’s website.? I find it fascinating that holistic planning is being talked about at an event like this (an academic research colloquium) and I applaud this wholeheartedly.?

An attendee/friend at the conference told me that the research distinguishes between financial stress (the feelings caused by specific stressors) and financial anxiety which is a negative state not specifically related to an identifiable source.? “Advisors are effective in reducing financial stress, but financial anxiety is more the domain of therapists”, he quoted Dr. Lutter.

Are financial planners being asked to be therapists now?? I did not see that service on the list expected of our profession in the Spectrem Study referenced above.

As a point of emphasis, it is not reasonable to expect that an advisor could deliver all the services noted in the above chart.? It would be like asking an internal medicine doctor to treat a patient for cancer and cardiac disease among other ailments.? It is just not possible – they don’t have the training for it.? There are other specialists that can collaborate for a better health outcome for the patient.

A CFP Professional completing a financial plan or offering investment advice would not draft a trust document or file tax forms unless they were licensed to do so as an attorney or CPA.? Furthermore, they may not recommend life or health insurance if they are not licensed to do so or otherwise not knowledgeable in the area. For the same reason, they would also not provide financial anxiety therapy to clients without a certain amount of expertise or licensure. There is, in fact, a whole emerging field in behavioral finance, which is fascinating.

Providing holistic guidance and creating financial and overall general well-being should be done by a team of professionals who can truly collaborate for the benefit of the client and their family.? This team of people should be able to provide a diverse skillset, expertise, care, and a desire to serve as part of a collaborative advisory group.

Whether you are an attorney, a CPA, a Financial Planner, a wellness therapist, or an insurance specialist, finding the right team of professionals to better serve the diverse needs of your clients is critical to their long-term financial well-being and will go a long way to meeting the very expectations that they have of us.

As a final note, my friend also reported back to me that one of the conclusions from a different academic presentation at the CFP Board Center for Financial Planning was that “research says that the value of holistic, personalized advice regardless of fee or commissions is the equivalent of an 82% increase in income”.? Presumably for the client, NOT the advisor.? And, if a representative and keynote speaker for the CFP Board said it, it must be true, right?

As we sit here today and try to figure out the implications of the proposed Department of Labor Fiduciary Rule 3.0 ruling on this whole issue, how an advisor chooses to get paid for his or her services does not appear to be the issue to successful financial outcomes of our clients. This is a discussion for another day, as the Department of Labor Hearings have just occurred (December 12 through December 13, 2023), on its proposed “Retirement Security Rule: Definition of an Investment Advice Fiduciary.”