My Firm is Losing Focus on the Financial Aspects of Planning

Beverly Flaxington

Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.

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Dear Bev,

Over the last several years the advisory industry has trended away from valuing financial expertise in order to put the emphasis on the relational or human side of investing. This makes sense but we have moved too far in the opposite direction. It’s in everyone’s best interest to start valuing the expertise it takes to craft a well-allocated portfolio and to ensure that portfolio is keeping up with client goals and market movements.

I obtained a CFA and believe it was the right thing to do but I work for a firm who operates from the philosophy of “skip the numbers discussion and focus on talking about what their kids ate for dinner.” I’m being extreme but this is how it strikes me. Do you think this will be like a lot of trends and movements and will run its course?

J.T.

Dear J.T.,

This short note has so many things embedded in it, it’s hard to find a place to start.

  1. As a human behaviorist who has been talking about the “human side” of finance and investing for a couple of decades now, I’ll go on record as saying it’s about time the industry is trending this way. While you may be working with numbers, what’s behind those numbers is people and people are complex and emotional. For too long the people aspect has been shunted to the side and the industry has been affected by this in many ways – so I am happy to confirm we see the same trend you described.
  1. Speaking of the human condition, an aspect of your inquiry stems from another emotionally charged component: the financial professionals who went to school because they enjoy delving into the numbers. These professionals are smart enough to obtain certifications like the Chartered Financial Analyst (CFA) or even a PhD in finance and can feel sidelined or diminished if the focus becomes more of a touchy-feely one. Not everyone can pass the CFA exam, but everyone can ask about the kids, right? The focus on relational aspects has its polar opposite effect of diminishing the importance of having an investment mind and capability and this is very difficult for many investment professionals to accept if they look at the new trend as portraying the importance of investing itself in a negative light. Of course, as a CFA charter holder you’re duty-bound to not “skip the numbers” (and not be part of a process that does!) – so you’ll have to determine if this approach has tilted too much in the wrong direction. In this vein, I don’t think most firms are saying “let’s disregard the numbers;” it’s more about adding to the discussion by expanding the dialogue to things that don’t appear to be directly linked to the funding plan. It’s more about expansion, rather than replacement, in my view.