Originally published on WealthManagement.com | August 2018
By Anton Honikman, MyVest CEO
Our industry is in the midst of a seismic shift towards goals-based wealth management. This requires the holistic management of client assets. To date, some advisors offer holistic financial planning that addresses an entire household’s assets, liabilities, and goals. Others provide holistic reporting that covers multiple investment accounts.
But holistic wealth management should be more than just planning and reporting; rather it should include dynamically managing your client’s investments the same way they think about it – as a whole. Yet the manual operations required to coordinate investment management across multiple accounts prevent advisors from doing this for more than a few top clients.
So what is the key to making truly holistic advice a reality?
Technology that can orchestrate multiple accounts across a household is the key to empowering the advisor of tomorrow to make holistic wealth management a consistent, scalable practice for all their clients.
Here are five paths to putting holistic wealth management into practice:
1. Connect financial planning to ongoing investment management: Holistic wealth management starts with linking upfront financial planning with ongoing portfolio management. Ideally, they inform each other in an ongoing automated relationship, where both can be adjusted as a client’s wealth and life circumstances change.
2. Organize household accounts into multi-account portfolios: Create investment portfolios that contain multiple taxable and/or tax-advantaged accounts which are then aligned with a client’s goals. Each multi-account portfolio can then be governed by a single investment strategy, or asset allocation, depending on the characteristics of the goal assigned to that portfolio. To be truly holistic, this implies thoughtful incorporation of account aggregation to consider both managed and non-managed (AKA held away) assets in these portfolios.
3. Cross-account coordination: Another unique capability you can’t get with managing each account in isolation is cross-account coordination, like managing wash-sales, avoiding concentration in the same security/sector across accounts, efficiency in trade order management, and asset location.
4. Go beyond just asset allocation and pursue tax alpha with asset location: A big opportunity with a technology-driven holistic portfolio is the ability to manage asset location, selecting the optimal account for each security within a household’s portfolio. This method places securities with yields subject to the highest estimated tax burden in tax-advantaged accounts, and vice versa. Most advisors want to achieve better performance through tax management but are challenged to put it into a regular precise practice given the manual overhead.
5. Demonstrate value with outcome-based conversations: One of the biggest transformations in wealth management is the move from performance-based conversations to one that focuses on client outcomes. Holistic wealth management allows you to change the focus to progress toward goals, risk management, and tax management – things that you can control easily with the help of technology to demonstrate your added value.
To remain relevant and competitive and to offer all your clients a high standard of care, embrace technology and client data to systematize your practice in support of holistic wealth management.
Originally appeared on page 45 of the Wealth Management 2018 Mid Year Outlook. (Note that Flash is required to view the document.)