Advice and the Advisor

How Financial Advisers Can Balance Client Needs and Investment Strategy


Trying to develop a profitable investment strategy for clients, as well as keeping tabs on the latest product offerings, is not an easy task, many financial planners say.

And part of the problem stems from within the industry itself.

"Too many people go to financial advisers ," said Catherine Valega, a certified financial planner at Green Bridge Wealth Management.

"This can lead clients to buy products that don’t suit their overall financial well-being. If the portfolio turns down, the clients feel burnt and less likely to consult someone good when they really need it," said Valega. (Read More:

Balancing what’s in the best interest of the clients and wanting to keep their business often exposes an underlying conflict, said Paul Auslander, co-founder and CEO of American Financial Advisors Inc.

"The client is the boss, but there’s often tension in the relationship," Auslander said. "Our profession has a tendency to take a ‘Dr. Feel Good’ approach and not be honest and tell clients bad news about their portfolio or their choices."

A major obstacle to making clients happy is persuading them to stay away from the constant 'get rich' schemes thrown at them, said Pete D'Arruda, president of Capital Financial Advisory Group, based in Cary, N.C. (Read More:)

"They go to a seminar on and are promised 7 percent returns, and they forget to look at the small print and the reality of what these seminars promise," D’Arruda said. "The public gets pumped over precious metals or something else and they don’t realize it’s not a good fit for them.”

That "get rich quick" compulsion can often lead to giving in to the demands against their better judgment or throwing in the towel and , advisers say.

So how does a financial adviser develop a good strategy for clients while using better judgement? For Michael McGervey, president of McGervey Wealth Management, it’s a give and take situation.

"We’re financial planners, and most clients are on board with what we’re doing, but we do get one who says ‘I want to buy this or that stock,'" said McGervey, who handles some 100 upper income accounts. "We’ll accommodate them and help make informed decisions. But I wouldn’t try to convince them not to do it."

For many advisers, it takes constant flexibility with services to keep clients happy, said Rob Clark, a partner at MPC, a financial planning service firm based in Orlando, Fla.

"We specialize in building diversified portfolios for clients, but we will increase or decrease asset classes depending on what we see in the economy," Clark said. “We also offer individual stock portfolios to accommodate clients that prefer stock picking."

Part of developing a client strategy comes with the constant stress of keeping tabs on and conditions.

"It’s a full time job to stay on top of our strategy — a capital preservation model with an offensive strategy," which, among other things, means "selling higher-risk portions in contracting markets," McGervey said.

Technology & Products

"But we’ve worked with developers to integrate state-of-the-art technology for this," McGervey added. "For instance, we have weekly scorecards for our securities from software tracking capabilities for the products we sell."

Adding to the burden of pleasing a client is simply gathering information on the various financial instruments. (Read More:

"Larger financial adviser firms have staffs to wade through the material, but an independent planner doesn’t really have time to go through it all," said Auslander. "That’s one reason advisers go to asset allocation rather than individual stock picking. It's simpler for them to do."

"There are new products coming out all the time, and with the Internet it’s easier to do research,” said D’Arruda, whose firm focuses on clients 55 years and older. "But we always ask — would our clients want this and that influences our choices."

Along with the volume of products is their sometimes .

"The products have more features and benefits than they did before," said Auslander. "Like guaranteed variable . They promise a certain amount of money, but there’s an internal charge for that piece of mind that’s often overlooked by clients who want them."

As clients vary, so do their needs, and that means advisers have to be on top of their game when it comes to the different money making strategies, said Brian Parker, managing director of EP Wealth Advisors.

"Corporations have moved away from defined benefit plans, and many clients have turned more to a monthly portfolio distribution with less risk," Parker added. “Still, other clients want the volatility and risk to make more money with minimal needs for the future. It's knowing how to balance the different types of portfolios that's important."

And if there are no good choices for clients, one adviser said it may mean biting the bullet and having the courage of telling a client to sit — and wait. (Read More:

"I believe in what we call ‘advance and protect’ instead of 'buy and hold'," said Clark. "If we feel it’s appropriate to take some profits and wait in cash until we find the next opportunity, we will."

In the end, industry experts say, finding the right balance between what clients want and what’s in their best interests is part of their job — but it’s never easy.

"You have to be careful with drawing a line in the sand when it comes to your clients," said D'Arruda. "We can find what they want if it makes sense. We try to help them see the right way of doing things. On the other hand, you have to be able to change. You don’t want to be (Jack) Kevorkian and help yourself commit suicide."

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