One of the most challenging parts of a wealth advisor’s job is assessing the risk tolerance and setting realistic portfolio goals for clients. Both naturally change over market cycles and a client’s life, but effectively managing this challenge can feel like asking for permission to look into a person’s soul for the real answers.
Some firms try to accomplish this by using a questionnaire, but the best advisors take a more nuanced approach. It is art NOT a science.
Back To School
I was attending a school board meeting recently when the discussion turned to the 21st century skills we want to teach our kids. Many schools around the country are have similar discussions.
During our meeting, it hit me that the list of skills we outlined required us all to look into our souls and define what we really wanted for our kids other than an acceptance letter to Harvard. After much back and forth, the group boiled down the key 21st century skills to the following:
Applying these essential skills is just as important for our kids as it is for professionals in the wealth management business.
Good Kids And Wealth Advisors
Resilience is critical not only for our kids, but as investors. Rebounding from failure or multiple attempts at success is the real world. It’s also character building.
Self-awareness is imperative because we need to be aware of how we impact others. This virtue seems to be lacking in younger people today. For advisors, understanding how your behavior and actions affect others is vital.
Risk-taking is what helps you get ahead. If you or your kids don’t take risk, you won’t succeed. After the financial crisis, people were too risk averse. You have to take thoughtful risk to advance.
Creativity is necessary for keeping an open mind about your portfolio. The markets are constantly changing. The creative mind sees opportunities where others don’t.
Discernment helps avoid disaster. For clients, discernment means the ability to judge your advisor. For advisors, it’s the ability to judge money managers and investment opportunities . A lack of discernment is the reason a fool and his money are soon parted.
Collaboration produces the most successful kind of wealth advisory relationships. An investor needs an advisor as a sounding board – and vice versa. If you collaborate with your advisor, you have a partner that can help you manage the risk in today’s financial markets.
These skills help will help our children live their dreams. Why shouldn't we take the same approach with our money?