The Wealth Consigliere

As Tax Day approaches, we are reminded of the power of the calendar.  April 15 is a date all responsible citizens are required to respect.  However, all too often, wealth advisors become slaves to the calendar and allow vital elements of their business to be ruled by it. It’s a question worth examining because there’s no real reason for it. In truth, the calendar is a convenient organizing principle, but it is in no way the optimal one for taking care of wealth management clients in the 21 st century. Three Areas Where the Calendar Currently Rules Through their investment consulting, wealth advisors add value for clients in three ways. All of these have been under the thumb of the calendar. The first is rebalancing a client’s investment portfolio. Most wealth advisors wait until the end of the year. That’s the way it’s always been done. However, some do take up the task more frequently, usually at quarter-end.  With the recent volatility ...

My late grandfather, who was born in 1910, loved to reminisce about the good old days. “When I was your age,” he would say, “I used to walk to school with all of my brothers. Didn’t matter what the weather was.  While we were trudging along, in sometimes freezing conditions, we always had a good time horsing around.” We clearly got the point: The good old days seemed so much better. We all knew they were much harder, too. Today, people don’t walk anywhere. In fact, those fortunate enough to work in Silicon Valley ride in air-conditioned buses, with Wifi and lattes available for all. No three-mile walk in the snow for them. American Heros TV journalist Tom Brokaw defined my grandfather’s cohorts as The Greatest Generation . Their greatness was the result of their worth ethic, their thrift and humility, and the incredible bond they formed in their personal relationships. This generation survived the Great Depression and World War II; very few compl...

The recent news cycle has been dominated by two very different stories that fascinate us: Facebook’s eye-popping, $19 billion deal for WhatsApp and the Obama administration’s growing concern about income inequality. How can these seemingly disparate points-of-view reconcile each other? Through the Pareto Efficiency Criteria , a well-respected economic theory about optimal economic growth. A Rising Tide The Pareto Efficiency Criteria states that as long as economic growth happens without hurting others, it’s good for an economy. In the San Francisco Bay Area, in particular, this concept is a hot topic. The explosion of IPO-driven wealth largely from tech entrepreneurs is creating an economic boom in the region. Some, though, argue there’s a downside. Prices for everything are higher. No doubt, there’s some truth to that, but there’s also the undeniable fact that when money is flowing, people spend more – a lot more. That does help everyone. To cont...

It’s rankings season, and we’re not dreaming of March Madness just around the corner and our chance to win a billion dollars . We’re talking about the wealth management industry’s plethora of benchmarks: Barron’s Top 1000 Advisors, InvestmentNews’ Top RIAs, Financial-Planning’s Top 50 Fee-Only Advisors. The list goes on. Since Wall Street’s instinct is that bigger is better, there’s glamor for both individual advisors and RIAs for topping these lists. But do the rankings really matter? After a career on Wall Street and now working with successful independent advisors, I see three points-of-view: 1) Rankings do matter; they reinforce the clients choice to hire an advisory firm; 2) Rankings are a distraction and don’t reveal anything meaningful; 3) Both points-of-view are valid. You can argue both sides of the argument. Why Rankings Matter With money mangers, it’s easy: Measure them by risk adjusted performance. For wealth managers, there is nothing so clear-...

The history of disintermediation has been very painful for industries and professionals of all kinds. Most never see the dislocation coming. In the information age, we’re savvy enough to realize that continual innovation will change the way we do our job. Counter-Intuitive As we set our goals for 2014, here’s a counter-intuitive idea to consider: Start disintermediating yourself now.  The Internet will render obsolete at least part of your value proposition over the next 10 to 15 years. The Three Stages of Disintermediation In the spirit of seeing around the corner, here’s the arc of distintermediation. Stage 1 is when early adopters embrace a new technology, product and service. These individuals are enamored with technology and how it creates opportunities to be better, smarter and faster. These people are early adopters by choice. Stage 2 is when a disruptive idea gains widespread awareness. Like all tech-inspired upheaval, establishment players r...