Personalization: An Advisor's Secret Weapon

Updated: Dec 1, 2020

The Dynamic Role of Financial Advisors

Financial advisors provide an invaluable service to retail investors. But the role of an advisor has been steadily evolving over the past few years.

Advisors were once focused on portfolio management – ensuring that you get the best return on your investment. However, with the rise of passive investment products, many advisors realized that they are unlikely to outperform the market on a consistent basis.

The best advisors today are focused on holistic financial wellness – enabling clients to maximize their lives through dedicated, personalized, and robust financial planning. This enables advisors to create a solid plan for each client to address spending, saving, health, investments, property, longevity, retirement, family management, and other financial aspects.

A great advisor is a highly dedicated individual who has their client’s best interests at heart. One challenge advisors face, however, is scaling a high level of personalized service. The economics of the industry dictate that in order to maintain a certain level of advisor profitability, the smaller the managed account size, the larger the number of clients required. Naturally, this limits the time advisors can spend on each individual account.

An advisor who serves the extremely wealthy population (over $25M in assets) can afford to manage fewer clients and provide white-glove service. Advisors serving “mass-affluent” clients (with under $5M in assets) are finding it challenging to provide this high level of personalized service.

Why Should I Care?

Given their large client bases, advisors tend to manage a limited number of “model portfolios”. These investment portfolios are built to match a certain “risk profile”. So, for example, if you are a young investor with many years of income ahead of you – your advisor might determine that you should be invested in their “high-risk” model portfolio in order to maximize your long-term outcome.

It is difficult, however, to fully encapsulate a client’s financial life into a “one-size-fits-all” model. Investors with the same risk profile may own different assets, be at a different life stage with corresponding life events, have different tax situations, and much more. While most advisors have the capacity to manage 5 or 6 model portfolios – the truth is that we need to find a way to enable advisors to provide each investor with a “personalized model”.

What this really comes down to is what investors care about most – performance. By not fully taking personal financial needs into account, the investor’s outcome will, almost certainly, not be optimal. Beyond the immediate financial implications of this, it can create a discontent investor – which is bad for business, especially given that approximately 90% of investors approach their advisor through word of mouth.

As an advisor, you want to keep your customers happy, and the best way to do that is to provide them with a financially robust, truly personalized product and experience.

Case in Point

Let’s look at a simplified example.

John and Anne are both in their mid-40s. They each have around $1M in investable assets and are looking to invest in order to retire in around 20 years. John works in the retail industry, whereas Anne works at a high tech company. If John and Anne were to approach the same advisor, they would be very likely to receive an identical portfolio offering. Typically, this offering could include certain exposures to market sectors such as finance, consumer goods, technology and health care, based on the advisor’s (or the firm’s) investment strategy.

Now consider this scenario.

If the retail sector were to take a hit, John would be significantly more exposed than Anne, since his income is entirely dependent on this sector. He might even lose his job as well as value on the retail industry portion of his portfolio. Anne’s portfolio would also be affected, but her overall risk would be considerably lower. In this simple case, the right thing to do would be to decorrelate John and Anne’s investment portfolio from their respective sources of income.

Let’s slightly complicate things and say that John also owns property in London, and that Anne has a 401(k) plan (from a previous job) which is managed at a large institution. It’s interesting to note just how quickly we can diverge John and Anne’s financial pathways and still – they would receive identical portfolios from their advisor!

I assume that by now, it is self-evident that John and Anne are two very different individuals. Perhaps John’s portfolio should be decorrelated from the European real estate sector, while Anne’s portfolio should account for her additional investment and the effect it has on her holistic financial risk.

A Win-Win Relationship

The best financial advisors aspire to go even further beyond these parameters and identify real-time life events, such as a change in job positions (within or between sectors), the birth of children (life insurance, anyone?), taking out a mortgage, illiquid asset exposure and more. More importantly, once the advisor is aware of these events, they should immediately implement actionable investment steps to account for them.

Taking all of these unique and individual attributes into account and providing the investor with a truly personalized, holistic investment service presents a win-win scenario for both investor and advisor.

The investor will receive an optimized, risk-adjusted portfolio which will ensure achieving their financial goals, as well as enjoying the high-touch, personal service provided by the advisor.

Across the table, the advisor will gain trust and satisfaction from their clients, meet targets, increase wallet share of existing clients, and acquire new clients who have heard about the excellent personal services the advisor provides.

How Can This Be Achieved?

We are currently witnessing the rise of fintech. Emerging personalization technologies are exponentially increasing day by day. Putting the client at the center represents a paradigm shift in increasing market share, boosting scalable opportunity for the financial services industry and offering customers services which were unavailable only a short time ago.

The time has come to empower advisors, enabling them to provide direct, digital, personalized value to the millions of mass-affluent investors who don’t receive the same attention and personal treatment that only the extremely wealthy receive.

I am CPO and Co-Founder of Cred. Cred is a disruptive WealthTech startup aimed at enabling financial advisors and institutions to truly personalize each of their retail clients' portfolios, based on their unique backgrounds, financial situations and preferences. This is the way investing will work in our generation, and we’re excited to be pioneers on this journey.

Feel free to contact me at, and find us on Facebook and LinkedIn!

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