2019 CFA Institute Wealth Management Conference Recap

Wealth Management

Last week, Matt Crow, Taryn Burgess, Zach Milam, and I attended the 2019 CFA Institute Wealth Management Conference in Fort Lauderdale.  We didn’t get a total headcount, but attendance appeared to be up from last year’s event.  There are probably a number of explanations for this, but perhaps the most plausible was the interest in this year’s focus on the psychological side of wealth management, which explored behavioral finance tendencies and how emotional decision-making can impact investment performance.  For this post, we’ve elected to summarize some of these presentations and their implications for financial advisors.

The Geometry of Wealth

Brian Portnoy, Head of Education at Magnetar Capital

In The Geometry of Wealth, behavioral finance expert Brian Portnoy, Ph.D., CFA defines true wealth as “the ability to underwrite a meaningful life” or “funded contentment.”  Dr. Portnoy distinguishes this concept from the blind accumulation of assets, which he likens to a continuous (and often unsatisfying) treadmill experience.  He contends that living a meaningful life and tending to financial decisions should be complementary, not separate, pursuits and uses three basic shapes to help readers visualize how to adapt to evolving circumstances (circle), set clear priorities (triangle), and find empowerment in simplicity (square).  Through this process, Dr. Portnoy maintains that true wealth is achievable for most people but only in the context of a life in which purpose and practice are thoughtfully calibrated.  He addresses the following questions to accomplish this goal:

  • How is the human brain wired for two distinct experiences of happiness and why can money ‘buy’ one but not the other?
  • Are the touchstones of a meaningful life affordable?
  • Why is market savvy among the least important sources of wealth but self-awareness is among the most?
  • Can we strike a balance between pushing for more and being content with enough?

Dr. Portnoy advises managers to help clients spend wisely (on experiences, others, and time savers) and hedge sadness as most investors are loss averse.

How Client Engagement is Being Disrupted

Julie Littlechild, Founder of Absolute Engagement

Julie Littlechild’s book, The Pursuit of Absolute Engagement, discusses the trends that are disrupting client engagement and why many advisors aren’t keeping pace with client demands.  She recommends that advisors answer these four questions to effectively respond to a client disruption (or at least stay one step ahead):

  1. Who are you designing the client experience to support? (Hint: Define an authentic niche, because you can’t design a compelling client experience around the needs of everyone)
  2. What does “extraordinary” look like through their eyes? (Hint: Actively involve clients in defining what extraordinary looks like, because you can’t base this on assumption)
  3. What is the client’s journey? (Hint: Understand the steps that clients go through and what they think, feel, and do at each stage because that will uncover their real needs)
  4. How will you support clients in their journey? (Hint: Define a communications plan that actively reflects the client journey and supports them along the way because that’s where innovation happens)

By answering these questions and anticipating clients’ needs, advisors are able to support their clients on a deeper level by shifting their focus from “good service” to a “meaningful experience.”

The Behavioral Investor

Daniel Crosby, Chief Behavioral Officer of Brinker Capital

Psychologist and behavioral finance expert Dr. Daniel Crosby emphasizes the importance of understanding human nature and investor psychology in the portfolio construction process.  Dr. Crosby contends that only through developing a deep understanding of why humans make decisions can we really ascertain how we should invest.  Specifically, he says individuals should avoid making investment decisions while in a H-A-L-T phase, that is Hungry, Angry, Lonely, or Tired.  By understanding the context of our decisions and our own behavioral shortcomings, we can become better investors and advisors over time.  Similar to Brian Portnoy, Dr. Crosby posits that true wealth encompasses psychological wellbeing not just asset accumulation.

Perception is Reality: Defining Your Value Proposition in a Competitive Marketplace

Nikolee Turner, Managing Director of Business Consulting at Charles Schwab

This presentation stresses the importance of branding and perception in developing relationships and a strong referral network from existing clients.  Nikolee Turner discusses how advisors can fine tune their value proposition to compel action from prospective clients and win new business.  One way to accomplish this feat is through the use of firm success stories and concrete examples of helping clients realize their financial objectives.  Turner found that such communication is often lacking as her firm’s research indicates that many advisors can’t even articulate their firm’s value proposition to prospective clients.  As the competition for client assets intensifies, the need for effective communication and a dedicated referral program has never been greater.  Mastering both, Turner contends, is critical for achieving growth goals and gaining market share.

All the sessions were well-received, and we’d certainly recommend these presentations and their author’s publications to anyone interested in this topic.  We’re looking forward to next year’s event in Seattle and hope to see you there.