Finding hidden assets

Finding hidden assets

If you’ve been an advisor for any length of time, you know there is a high likelihood that some of your clients have assets with another broker or advisor. Indeed, the research bears this out. For example, Cogent Research reports that the average investor holds almost half (46%) of their investable assets outside of their primary advisor relationship.1

While there are many reasons clients keep their investments in different places, a couple are worth highlighting:

  • The #1 reason investors say they use multiple advisors is to diversify risk (44% surveyed)
  • The #1 reason cited for using more advisors today than 3 years ago is due to complexity/diversity of markets (26% surveyed).2

Perhaps of greater concern are the reasons why: The #1 challenge investors cite in working with an advisor is getting them to listen to what’s important to them. Of investor respondents who have multiple advisors but indicated a primary advisor, 55% said their primary advisor was not aware of decisions by, and performance of, other advisors. Some said their primary advisor was not even aware that there were other advisors in the picture.

Chances are you have clients, potentially good clients, who have assets and relationships with other firms and advisors for which you have not accounted. The questions we think an advisor should be asking, where this is true, are as follows:

  1. Is the portfolio YOU THINK THEY HAVE the one they actually do have?
  2. Is the portfolio THEY THINK THEY HAVE the portfolio they in fact do have?

If the only assets in question are the ones you manage then the answer to those questions would likely be “yes.” But we also know that even a modest addition or subtraction in most asset classes can change the expected risk/return characteristics of a total portfolio quite dramatically.

That’s where all those “hidden assets” come in. They have the potential of taking the strategy, plan and portfolio you have agreed with your client and turning them into something completely different. Worse, the gap between intentions and reality may not be something into which you have visibility. It may not be something another advisor can see. Most importantly, it may not be something the client can accurately assess.

So what to do? We recommend making a point to engage with your clients specifically around this topic. It could be part of the regular review cycle or as a result of a major life change. The basic talking points are these:

  1. Acknowledge the thinking and work you and the client together put into creating the current strategy, plan and portfolio.
  2. Remind the client of why and how you selected the asset classes, asset allocation and investment products for the current portfolio.
  3. Make the point that assets that aren’t reflected in the current plan can have a significant impact on the likelihood of achieving the client’s objectives.
  4. Ask for the opportunity to redo the strategy, plan, and/or portfolio taking into consideration all of the client’s assets ­– whether or not the client decides to consolidate with you. This last point is the critical one. You can ask for the order later, but not now.

Once you have built the new strategy, plan, and or/portfolio with all of the assets in scope you can compete for the additional business.

Post originally published October 9, 2012. Revised October 10, 2012.

1Cogent Research survey, Investor Brandscape 2012

2State Street and Knowledge@Wharton Survey of over 2,000 advisors and nearly 800 investors, 2009-2010

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