Managing Director and Head of U.S. Financial Intermediaries
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A lot can happen over a cup of coffee. A long to-do list may suddenly look manageable. A business partnership may grow from discussing an idea to drawing up a contract. And in the mind of a client, a financial advisor may evolve from simply a purveyor of investment ideas to a trusted behavioral coach.
While that’s a lot to attribute to a cup of coffee, I’d like to share a story with you about how an advisor who works closely with Vanguard expanded his business by meeting clients regularly for coffee.
Of course, advisors meet with clients all the time, but this was during the financial crisis, and this advisor sensed that his clients needed more frequent communication—a little hand-holding—to help them through a history-making market swoon. He began meeting clients at a coffee shop to provide more consistent contact and more frequent updates on the markets.
Soon other customers in the coffee shop started noticing the advisor’s attention to his clients and started talking to him, creating potential new business. Clients who met with him started bringing friends and potential referrals to the discussions—all because people recognized the value of advice.
Sure, it’s one small story about a guy in a coffee shop, but it indicates the broader need for advice out there. At Vanguard, we believe so strongly in advice that we recently put a number on its value. We believe advisors can add value by using best practices for wealth management compared with advisors that don’t use them.
That figure, which we call advisor’s alpha, will vary,depending on the advisor and the client, and we don’t expect it to be achieved yearly. But over time, advisors who help clients choose low-cost, tax-efficient investments and employ other best practices can add significantly to returns.
Behavioral coaching, whether in a coffee shop or at your office, presents the biggest opportunity to provide alpha. By helping clients stick with investment plans when markets are turbulent and by steering them away from chasing the next trendy stock or fund, you can increase the likelihood that clients will attain their goals.
We’ve been watching the nature of these “coffee shop conversations” evolve over the years. Today they’re not so much about picking the right stock or the right fund to beat the market. They’re about helping clients identify goals, figure out how to reach them, and stay on track along the way.
Advisors are essentially giving their clients appropriate levels of exposure to the broad stock and bond markets, then focusing their time and skill on providing the kind of guidance that serves as the foundation for long-term, trusted client relationships.
Not a bad return for the price of a cup of coffee.
Blog by: Martha King, Head of U.S. Financial Intermediaries and Managing Director of the Vanguard’s Financial Advisor Services.
© 2014 The Vanguard Group, Inc. All rights reserved. Used with permission.