Maximizing Returns: 3 Essential Services Your Financial Advisor Should Provide

A financial advisor should communicate regularly with clients, rebalance portfolios during market volatility, and perform tax-loss harvesting. Lack of communication can leave clients feeling uncertain, while rebalancing and tax-loss harvesting can help control risk and enhance returns. If an advisor is not doing these things, it may be time to consider finding a new advisor who is working in the client's best interest.

Financial advisors play a critical role in helping investors navigate the complexities of the financial world. To ensure that clients remain confident and that their investments are well-managed, advisors must engage in several key practices. This article explores the importance of regular communication, portfolio rebalancing during market volatility, and tax-loss harvesting, and highlights the potential risks of not adhering to these practices.

Regular Communication

Effective communication is essential for building and maintaining strong client relationships. According to WiserAdvisor, advisors who communicate clearly and consistently with their clients are better positioned to turn prospects into long-term clients [1]. Regular communication helps to address client concerns, provide updates on their investments, and ensure that the advisor is meeting their needs. Without regular communication, clients may feel uncertain about their financial situation, leading to potential dissatisfaction and a higher likelihood of seeking alternative advice.

Portfolio Rebalancing

Market volatility can significantly impact investment portfolios. During these periods, advisors should rebalance portfolios to maintain the desired asset allocation and risk profile. Rebalancing involves buying or selling assets to return the portfolio to its original mix, which helps to control risk and enhance returns. According to Deloitte, effective data risk management is crucial for financial services organizations, and rebalancing is a key aspect of this process [3]. By rebalancing portfolios, advisors can help their clients weather market storms and achieve their long-term financial goals.

Tax-Loss Harvesting

Tax-loss harvesting is a strategy that involves selling investments that have declined in value to offset capital gains from other investments. This practice can help investors reduce their tax liability and potentially enhance their after-tax returns. While tax-loss harvesting is not a guaranteed strategy for generating profits, it can be a valuable tool for advisors to use in conjunction with other investment strategies. Advisors who do not utilize tax-loss harvesting may be missing out on an opportunity to improve their clients' financial outcomes.

Conclusion

Financial advisors who prioritize regular communication, portfolio rebalancing, and tax-loss harvesting are better equipped to serve their clients' best interests. By implementing these practices, advisors can help their clients feel more confident and secure in their financial future. Conversely, advisors who fail to engage in these activities may be putting their clients' interests at risk, potentially leading to client dissatisfaction and the need to seek alternative advice.

References

[1] https://wiseradvisorgrowth.com/mastering-client-onboarding-best-practices-for-advisors-to-create-long-lasting-relationships/
[2] https://www.fa-mag.com/news/ameriprise-lands-former-merrill-team-managing-more-than--300m-82933.html
[3] https://www.deloitte.com/us/en/services/consulting/articles/data-and-risk-management-financial-services