How much is an advisor really worth? Do they really add enough value to justify their fees?
It’s a question Envestnet is attempting to answer. The company unveiled The Essential Advisor at its Advisor Summit on Wednesday. The initiative “advocates for the quantifiable value professional financial advisors deliver to consumers when helping them reach their financial goals.
“The initiative draws on the proprietary expertise Envestnet has obtained from supporting almost 50,000 advisors on its platform, enabling the firm to provide insights into how the most successful advisors are running their practices,” according to the compnay.
The Essential Advisor is grounded in the firm’s Capital Sigma: The Return on Advice study, which finds advisors have the potential to add 3 percent (300 basis points) in value to their clients annually.
It delivers “actionable insights and educational programs,” including an enhanced vision for the Envestnet Institute and culminate in the release of a new book, The Essential Advisor: Building Value in the Investor-Advisor Relationship.
“The principle of being an ‘essential advisor’ is a driving catalyst for how we will continue to empower the nearly 50,000 advisors who utilize our platform and the millions of accounts those advisors service—acting as the central idea guiding all of our strategic initiatives, from our ongoing technology innovations to our product roadmap,” said Bill Crager, president of Envestnet, said in a statementt. “Our goal is to put our expanding network and solutions to work to help advisors and institutions across the industry assess and refine their practices at all stages of their business development.”
Crossing the Digital Divide by Delivering a Return on Advice
While digital advice platforms continue to make headlines, they cannot deliver the added value and insightful guidance that investors can receive when they develop a trusted, long-term relationship with a professional financial advisor, according to the Capital Sigma white paper. The study’s research, conducted by Envestnet | PMC’s Quantitative Research Group, found that there are several pillars, or sources, of advisor-created value that can be quantified. These pillars include financial planning, asset class selection and allocation, investment selection, systematic rebalancing, and tax management. Advisors who successfully implement all of these pillars can produce around 3 percent of annual added value for a client’s portfolio.
“The top advisors of the future will be those who can easily customize advice and touchpoints to the specific needs of each client, as well as effectively communicate the value they add,” added Jud Bergman, Chairman and CEO of Envestnet. “The Essential Advisor leverages our Capital Sigma research as a framework for how advisors can successfully cross the digital divide to strengthen client relationships and increase productivity—and, ultimately, win in the digital age.”
The Essential Advisor: A Roadmap to the Future for Advisors and Investors
Envestnet’s ongoing effort to help advisors implement the Capital Sigma pillars of value and return on advice will culminate in the release of The Essential Advisor: Building Value in the Investor-Advisor Relationship. The book, published by Wiley, will be available Monday, May 23, 2016.
The book’s co-authors are Crager and Jay Hummel, managing director of strategic initiatives and Thought Leadership at Envestnet, and its foreword is written by Jean Chatzky, Financial Editor for The TODAY Show.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
