July 2017 | 

What’s a Financial Advisor to Do? Providing Real News and Actionable Advice

What's a Financial Advisor to Do

“We’ve got too much information,” says Wharton adjunct finance professor Chris Geczy. “It’s a relatively new problem in wealth management affecting both investors and advisors. There are so many voices and outlets for advice today, it’s not always easy to figure out what’s important and what to pay attention to.”

Geczy says both groups are also facing a profusion of new pressures, including outcome-based approaches coupled with new supportive technology, retirement concerns, underfunded contributions, compressed expected returns, regulations, and fintech. “At no other time in my life has it been a harder time to be an investor or an advisor,” he says.

That realization led to the start of the Wharton Wealth Management Initiative (WMI), which is directed by Geczy. “At Wharton, we treat wealth management as a discipline, both from the investor side and the advisor side. We provide trusted information and a better understanding of the new investment landscape. Our thought leadership on wealth management includes core knowledge and principles, the latest research, and best practices thinking.”

WMI was also founded to educate, through programs for individuals, families, and investment professionals, as a complement to existing efforts and as an organizing force in Wharton’s wealth management-centered activities. “We see both sides of the equation, and can connect both groups to the most rigorous research and relevant knowledge on wealth management. Today you must be able to tell the signal from the noise, and put those signals into a context that you can base investment decisions and professional advisory services on.”

Geczy says the current environment is especially hard on investment professionals. “They are under increasing pressure to deliver value, and that pressure is coming from a number of sources. There are new regulations, business models, and competitors, plus the underperformance of active management, which used to be a go-to for investors. Expected returns are lower than they were 20 years ago. Advisors have to find ways to deliver value, investors expect it, and that is another important reason why WMI exists.”

Programs for advisors and investors are taught by Wharton faculty, and introduce cutting-edge research findings, including a newly democratized wealth management model that evolved from those used previously only by the ultra wealthy and certain significant financial institutions. There is also a growing body of research and psychometric and communication technologies that can help advisors better understand their clients.

“This is a growing area of importance for investment professionals,” says Geczy. “People talk about behavioral finance as if you could separate the two. Of course you need broad subject matter expertise, but at the end of the day finance is definitionally about behavior. You can’t undervalue elements such as risk aversion, and mood and attitude toward it, along with how elements of behavioral finance influences relationships between investors and their advisors and the decision-making process.”

For this reason, Wharton finance programs include content on communication styles, emotional intelligence, influence, and persuasion. Geczy says these topics are central to understanding personalities, which in turn informs effective communication, portfolio design and management, and risk management.

In addition to individual programs on a broad range of wealth management topics, Wharton offers a Certificate of Professional Development (CPD) in Finance, which is awarded upon completion of four programs in two years or fewer. Those programs may include industry designations such as Investments & Wealth Institute™ and CEBS (Certified Employee Benefit Specialist), and offerings in leadership, negotiation, and persuasion. “Wealth Management is whole brain,” says Geczy. “The curriculum is flexible and you can customize the Certificate to meet your goals.”

Ultimately, it’s up to individual advisors to keep up with trends, source trusted information, modernize their business models, and deal with mounting new pressures. The Wharton Wealth Management Initiative addresses them all. “You need to have a value proposition that delivers,” says Geczy, “and we offer an opportunity to invest in the most important capital of all — human capital.”