We are living in extraordinary circumstances. The coronavirus pandemic has altered the way we conduct business, interact with colleagues, friends, and loved ones, and has altered human behavior on a global scale.
It is more than a financial downturn, it is a global health crisis that has impacted health, safety, and, of course, finances across the globe.
Advisors and their clients have had some concerns over business and financial recovery, which is exactly what we want to talk about today. We are here to show you that our ACP system provides added security for advisors and their clients during these unprecedented times.
How does it work? That is what you will find out.
The information for this blog post was curated from our ACP Insights Webinar hosted by two of our members, Hannah Basil Bryant and Chip Simon. We are grateful for the knowledge and expertise they have provided and are delighted to communicate it to all of your here today.
Concerns facing advisors
In any type of financial distress, advisors may feel added pressure to demonstrate their value to clients. The top three concerns advisors in this situation face are,
- Loss of revenue
- Loss of clients
- Loss of time
The ACP System has a built-in safety net for advisors to protect them in the event of an economic downturn. Let’s take a closer look at how the ACP system combats these top three fears to set advisors up for success.
ACP + Revenue
One of the top concerns advisors may face is the fear of losing revenue. But this fear can be assuaged with the right fee structure. Our advisors adopt a retainer model which calculates fees on an annual basis.
Under the ACP System, fees shouldn’t be tied to unstable entities like the market. Rather, fees should be applied based on the comprehensive value you provide to clients alongside asset management. Assets aren’t the most important part of your client’s financial plan, instead, they are just one part of that plan.
When you include elements like cash flow, insurance, taxes, and estate planning you are able to apply comprehensive planning to your practice and rely on those fees to sustain you as opposed to short-term market fluctuations.
With the retainer model, fees are calculated once per year, providing the advisor with a clear picture of their projected cash flow throughout an entire fiscal year. This takes the guesswork out of it and encourages consistency and stability. ACP’s proprietary fee calculator helps advisors properly set fees according to the value they provide. It does this by assessing a client’s income and marketable assets, as well as the complexity of their financial landscape to determine the right fee to charge.
Adopting the retainer model means that your fees won’t be subject to market fluctuations on a dollar-for-dollar basis. As opposed to an AUM model that is directly tied to market performance, the retainer model is based on the comprehensive value you provide and takes all of the work that you do for clients into account.
ACP + Clients
Another top concern for advisors in turbulent times is the potential loss of clients. Losing a client is never easy and it is something that the ACP system is designed to prevent.
Our program is built on cultivating, nurturing, and sustaining client relationships. Trust is always at the center of that relationship and by establishing trust early and maintaining it throughout client interactions, you will be more likely to retain more loyal clients.
How can you build the type of trust that translates into loyal clients?
The first step is offering true comprehensive financial planning. Here at ACP, our members are passionate about the role comprehensive planning plays in their clients’ lives. Here are a few examples of elements that comprise comprehensive planning:
- Tax planning and preparation
- Cash flow planning
- Investments (IRA, 401k, brokerage accounts, etc.)
- Estate planning
- Lifestyle planning
All of these elements work together to create a plan that is truly representative of the client’s life. For example, during this economic downturn, you can work with clients on the aspects of their plan that they can control like insurance, tax planning, current cash flow needs, and estate planning. You can help assess new underwriting laws in insurance or new signing laws on estate planning documents. The retainer model gives you the freedom to provide that advice without worrying about your compensation.
This type of planning emphasizes and builds trust in your client relationships. A quote that Hannah mentioned in her presentation that she found particularly inspiring was, “If you live by investments, you will die by investments.” This just goes to show that investments are only one part of the planning process. Our advisors at ACP are able to offer a different value proposition. We prioritize peace of mind and safety, providing a model that works for your clients when times are good but also when times are bad.
ACP + Time
The last advisor-focused concern we will address today is the fear of losing time. In any financial crisis, advisors could be worried about added phone calls, emails, and an onslaught of client needs, updates, rebalancing, and increased communication.
Well, the ACP model flips that idea on its head. For our advisors, the initial investment in time and education to learn, implement, and manage our system is the major time spend. That way, when there are some bumps in the road, they have already built a system that can absorb those shocks and maintain calm.
Since the ACP model is built on comprehensive planning, when the markets drop our advisors don’t have to scramble to rebalance portfolios and field panic-stricken calls. Instead, they take a holistic approach and look at each aspect of your plan before making any investment decisions. This requires a lot of education, strategy, and mutual buy-in from the client on the front end, but you end up with a plan that stands the test of time.
Concerns facing clients
Here at ACP, we know that our system benefits both the advisor and the clients they serve. Your clients have a lot going on, with managing potential layoffs, working from home, schooling the kids, and more they find stress at every corner. Our system seeks to provide peace of mind and emphasize financial security to help get them through tough moments.
In an economic downturn of any kind, but especially one like this, clients often wrestle with the following:
- Loss of money
- Loss of lifestyle
- Loss of sleep
The ACP system seeks to alleviate those concerns. How do we do it?
Our advisors work to help their clients focus on the things that they can control as opposed to the things they can’t. While they might not be able to control the market, they can control building up a cash reserve in an emergency fund, they can live below their means to prioritize safety, they can make a plan for their employment situation, they can build a foundation for their cash flow, etc.
When you look at it, there are so many more opportunities to strengthen what you can control than you might have initially thought. Our advisors know that their clients are real people with real problems, fears, dreams, goals, and desires. They are there to set up a comprehensive financial plan that speaks to their humanity. One way they do that is one of the cornerstones of the ACP philosophy: functional asset allocation.
Why functional asset allocation matters
Functional asset allocation takes asset allocation to the next level. It really looks at a person’s overall needs and prioritizes those to create a plan that is more closely aligned with their goals.
Traditional investment and money management firms see asset allocation simply as a way to yield high returns for low risk. In doing so, those firms mostly focus on the division between stocks and bonds. But ACP sees it differently.
Functional asset allocation takes into account a few different elements:
- Home equity
First, it is important to emphasize the importance of safety over yield, and prioritizing the client’s liquidity is a big part of that conversation. Home equity is another key area that allows clients to leverage interest rates and work inflation in their favor. The last element is simplicity, especially where the diversification of stocks is concerned. By maintaining a simple plan, you will be able to keep taxes at bay while still emphasizing returns.
The advisor is then able to apply functional asset allocation to their client’s different stages of their wealth-building journey to provide a truly custom, comprehensive, safe plan. With this application, the advisor is able to guide and coach their clients in a way that makes sense to them.
A practical application of functional asset allocation that Chip discussed in the webinar is a bond ladder. With a bond ladder, he is able to set his client’s up with secure cash flow and liquidity for 10-15 years. That level of security built into his clients’ plans goes to show that prioritizing safety over yields works and that clients trust and believe in that to support them. That type of consistency is always crucial, but even more so when times get tough.
The ACP System is built to last
Our system has inspired advisors to build financial planning practices that inspire trust, value, and dependability. By adopting our model, advisors have been able to focus on the work they love most while providing optimum value to their clients.
We can’t promise that times will always be good, but we can promise to be there through it all. Are you interested in learning more about how you can apply the ACP model to your practice? Set up a call with a team member today.