One thing that has become increasingly evident over the years of interaction with clients is the pervasive need for financial literacy on the part of these clients. This is not to say that clients are lacking in intelligence or uncaring about financial issues. Some clients are highly educated and trained professionals – doctors, scientists, engineers – whose focus is on non-financial aspects of their jobs and lives. Others are very busy entrepreneurs, parents, and businessmen or women who simply do not spend much time or energy on financial issues. What they all have in common, though, is a lack of confidence and understanding in financial issues sufficient to help them make the right decisions.
This is where a financial adviser comes in, at least for a fair number of clients, offering advice and education on financial issues to help the clients with their life planning. This guidance from advisers uniformly encompasses what types of investments an adviser believes the client should pursue but really goes much further to cover choices of techniques and tools a client may benefit from as well as how to address all the risks life brings with it.
What might seem obvious to a financial adviser – why a client should not take early distributions from a qualified retirement plan or what benefits a long term care insurance policy may provide – may not be understood by many clients. The repercussions of bad client decisions can ruin their financial lives and make it at best a difficult thing to plan adequately for retirement and other lifetime goals. This is where it is essential for financial advisers to step it up and educate their clients about what their choices are and why one approach may be preferable to another for a particular client’s situation. This is not about the fiduciary duty discussion currently taking up public attention but is more about the role of the financial adviser as helping clients make the right decisions. The benefit to both client and adviser and their relationship is significant and will go a long way to making both of them more successful.