Are you an A-plus advisor? Or a lagging C? A new digital tool born from a partnership between
Billed as the industry's first financial advisor assessment, Envestnet's "Intelligent Financial Life Advisor Practice Score"
The minds behind the tool say that the goal is to evaluate the degree to which an advisor is helping clients "achieve peace of mind and financial security regarding their ability to meet all their financial needs and goals." Envestnet, a technology and software company for advisors and financial institutions, said the assessment provides insights on how an advisor can deliver greater value and achieve higher levels of client satisfaction to help them grow their business.
Envestnet Chief Marketing Officer Mary Ellen Dugan told Financial Planning that the assessment was developed following an online study conducted by Aite-Novarica Group late last year. The study established the assessment's performance benchmarks by asking 483 U.S. financial advisors detailed questions about their practice, the nature of their client base and how they worked with clients.
Through analysis of the survey data, Aite-Novarica Group made a quantitative assessment of how well each advisor was delivering financial wellness to clients based on the following five categories:
Breadth of financial advice provided: Advisors who counsel on a wide range of topics, including wealth transfer, tax planning, insurance planning, debt advisory and cash planning, as well as investing and retirement readiness, produced better outcomes for their clients compared with advisors whose advice was more narrowly focused.
Frequency of multi-goal financial plans: The creation and implementation of comprehensive, or multi-goal, financial plans have an edge over advisors who don't engage in formal plans, or who deliver plans to clients that addressed only one or two goals.
Addressing the emotional side of money: Advisors who help clients understand how their attitudes and behaviors towards money affect their ability to reach their goals score higher than those who didn't.
Engaging spouses and other family members: The inclusion of clients' spouses and other family members in meetings and conversations about financial goals tends to help advisors achieve better client outcomes.
Breadth of capabilities on platform: Even if advisors don't utilize the full range of technology capabilities available to them, having a versatile and varied stack at their disposal is common among top performers.
"Anybody can go in and do it," Dugan said. "Putting your email in is the one criteria, but we hope that this becomes an ongoing thing where you take the test this year, and maybe next year, you benchmark yourself and see how things are changing. This is a conversation we think everybody (in the industry) should be having."
Dugan said there is a strong correlation between achieving a top Advisor Practice Score and managing more client assets.
Advisors with a score of 80 or higher manage $443 million in client assets on average, representing 69% more assets than their counterparts who scored in the bottom quartile of the survey with a score lower than 67, according to Envestnet.
"We know the top quartile has more assets that they're managing. They have a higher increase of new clients that come in, so they're expanding their share of wallet," she said. "So as an advisor … this will help you understand where your score may not be as high as you might like it to be. We think that it will have a business impact overall, and that's really the exciting part.
"You can look at this, reflect on this and see where you're performing well by your own evaluation and what you want to lean into 2023 approaches."
Also released with the assessment tool was an accompanying white paper called
According to the paper, generational cohorts of clients have transformed wealth management. Baby boomers, who control the bulk of wealth in the U.S. and represent 54% of surveyed advisors' top 20 clients and 42% of all other clients, require a more comprehensive range of advice needs and holistic support as they enter retirement and decumulation.
Gen Xers, also known as the sandwich generation, represent around a quarter of advisor clients and are entering their peak earning years. Their needs range from college savings to supporting aging parents and everything in between. The oldest Gen Xers will also turn 65 in 2030, and their needs will shift to retirement income and longevity planning.
Millennials represented only 6% of surveyed advisors' top 20 clients and 13% of all other clients. Their top needs include paying off college debt, buying a house and saving for retirement. The study also found that millennials are more informed than previous generations, have higher expectations, are more digitally inclined and have more options for advice. That means advisors will need to expand their offerings to compete for their attention.
Dugan added that the score isn't something being developed for bragging rights or to populate "best of" ranking lists. And it's not a high-school popularity context. The process is completely advisor-facing and focused on helping firms get better.
"It's your score and nobody sees it but you," she said. "How are you actually talking to your clients about the daily finances that they have and their long-term goals? So this is really an assessment to do that."
