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The Investment Industry in 2018 – Why Change is Good

There is no denying that it is an exciting time to be in the investment industry. Technological and regulatory changes, combined with the evolving preferences of key demographic groups are pushing RIAs and other financial professionals to blaze new trails.

While this makes many in the industry uncomfortable, adaptation to the new investment landscape will be crucial, and ultimately, it will come down to a ‘survival of the fittest’ scenario. Those who don’t leverage technology, and continuously seek information that can change their business model are going to be at a huge disadvantage—one that could eventually put them out of business. Emphasizing certain key concepts to your clientele can be one way to ease everyone’s mind during this tumultuous era.

Emphasize Long-term Planning vs. Short-term Goals

The market is currently at an unprecedented high, and while predictions tend to be favorable over the next few years, there is still a lot of risk with any investment. Periods of dramatic market fluctuation tend to make investors nervous. Stressing the difference between long-term planning and short-term performance will help to convey the true value of an advisor, including the knowledge and experience they have, allowing them to better navigate periods of economic uncertainty.

Embrace the Role of Advisor and Educator

One compelling industry prediction is that over the next decade, advising will undergo a shift from asset management functions to providing more strategic planning and continuous coaching to clients. Some firms have already gone through mergers or acquisitions in order to provide this scope of services to their clientele. Mergers and acquisitions can also serve to leverage collaboration, save time, acquire talent and reduce the learning curve —all of which will serve as a competitive advantage over those that do not evolve in step with the industry.

Communicate Clearly

In order to adequately prepare a client for their investment future and their relationship to you, the advisor, you must clearly communicate the value in your personalized services and industry knowledge, and why it is an asset. Typically, clients have a fundamental understanding of this, but providing this information in a way that allows them to see the relationship between compensation and all services provided, rather than just portfolio performance, helps them to understand exactly what they are paying for. It is also imperative to clearly explain the risk levels of all investments, as well as conveying an understanding that unforeseen events can always have a huge impact on their investments, something no professional can anticipate.  

Welcome Transparency

On March 15th the U.S. Court of Appeals for the Fifth Circuit ruled in Chamber of Commerce v. U.S. Department of Labor that the Department of Labor had exceeded its boundaries in adopting the Fiduciary Rule, very likely resulting in its dissolution as early as May of this year. But there remains a great deal of uncertainty over what will happen next. Jay Clayton, Chairman of the Securities and Exchange Commission, is currently leading the charge on implementing a fiduciary standard for brokers and advisors, so the concept of a uniform rule isn’t going away. The call for greater transparency in the industry could get stronger—and could be good for business. When advisors engage in discussions about compensation, fees, and investments with or without a load, they demonstrate the ability to be candid and trustworthy, a trait that every investor looks for in an advisor.

Ditch Expectations

If you had asked an advisor in the 1990s what they thought the industry would look like today, I can assure you their answer would be nowhere close to where we are. Technology has revolutionized many industries and processes. Furthermore, unanticipated regulations, consumer preferences, and the speed in which information and transactions occur have all had substantial impacts in the progression of the industry. Just as no one could foresee the rapid onslaught of changes in the past couple decades, we are equally ignorant of what the future holds. Remaining nimble and ready for change, in any form, will be the best way to thrive and grow your advising firm.

The future is a scary place, and humans tend to resist change if they can. But within the investing industry, these changes don’t necessarily have to have a negative connotation. In fact, RIAs who innovate and welcome change by positively incorporating it into their business model and culture, can come out as big winners moving forward.

Do you have any questions? Speak with an Investor Relations Representative.

Articles or information from third-party sources outside of this domain may discuss KBS Direct or relate to information contained herein, but KBS Direct does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party content, do not constitute an approval or endorsement by KBS Direct or NCPS of the linked or reproduced content. KBS Direct makes no representations as to the appropriateness of an investment in the KBS Growth & Income Real Estate Investment Trust REIT for ERISA plan fiduciaries and IRA owners and no investment advice is being provided.  ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in the REIT’s shares. The Growth & Income Real Estate Investment Trust is offered through North Capital Private Securities, member FINRA/SIPC.
Meeting of shareholders

Navigating Change as an RIA – Tips for Prosperity in a Transparent Environment

The investment industry is a client-driven market, which relies heavily on customer satisfaction. Unfortunately, their level of satisfaction is often tied to portfolio performance, much of which depends upon market conditions beyond anyone’s control.

Even though the Department of Labor’s (DOL) Fiduciary Rule was struck down on March 15th, it may “live on” until the outcome of the appeals process is fully known. This means the advisor-client relationship will likely continue to undergo additional transformation when it comes to greater transparency surrounding fee schedules, conflicts of interest, and any upfront fees or commissions, known as a “front-end load.” Despite the uncertainty of what will happen, there are several reasons for why rule-inspired changes can have a very positive effect for Registered Investment Advisors (RIAs), in particular.

RIAs are Ahead of the Crowd

The fiduciary duty required by the Rule impacts the entire spectrum of financial professionals with clients, but acting as a fiduciary is old-hat for most RIAs. It’s simply a part of the way they do business as usual. Their experience provides them with a better understanding on how to approach transparency and clarity with clients, as it relates to fees. While other professionals may struggle with this concept, the change may have little to no impact on most advisors—giving them an immediate head start.

Embrace the No-Load Investment Options

The complexity of the different types of loads attached to different investments is part of what led to the Fiduciary Rule. Historically, many investors have remained oblivious to whether or not their investments carried a load. With the increase in transparency that is occurring, it is not difficult to foresee a corresponding increase in their popularity, especially with those investors that take an active role in educating themselves on all of their options. By embracing this change in consumer preference, RIAs may be in a better position to maintain high customer satisfaction levels. This is a key strategy for offsetting any lost income from a decrease in loaded investments.    

Focus on Referrals

When RIAs approach their business model by prioritizing customer satisfaction, it naturally leads to a very satisfied clientele base. While their repeat business is quite important, satisfied customers also usually provide another huge benefit. They become a source for referrals, which is the most effective way to attract new clients, especially ones with greater affluence.

Assign Value to Knowledge and Experience

The increase in popularity of no-load investment options will likely induce a reduction in income for some RIAs, which will need to be mitigated. The best way to do this is to help investors tie compensation rates to the value of advice, rather than on transactions. The emphasis has historically been on portfolio performance, and this is still a very important component, but clients need to understand that they are paying for insight and experience—the same way most other professional services are compensated.

Overall, RIAs are in a better position for achieving transparency while maintaining, or increasing, customer satisfaction. For many, accepting this change may be the hardest part, but once that happens, the rest can fall into place, and many will realize this is a better long-term business model.

 

 

Do you have any questions? Speak with an Investor Relations Representative.

Articles or information from third-party sources outside of this domain may discuss KBS Direct or relate to information contained herein, but KBS Direct does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party content, do not constitute an approval or endorsement by KBS Direct or NCPS of the linked or reproduced content. KBS Direct makes no representations as to the appropriateness of an investment in the KBS Growth & Income Real Estate Investment Trust REIT for ERISA plan fiduciaries and IRA owners and no investment advice is being provided.  ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in the REIT’s shares. The Growth & Income Real Estate Investment Trust is offered through North Capital Private Securities, member FINRA/SIPC.
Investors group

Investors Demand More Transparency: Are You Ready To Deliver?

Today, many investors tend to rank transparency equally with trust when considering an adviser or investment deal. That’s why it’s important for financial firms to deploy solutions that will drive deeper levels of transparency throughout their entire organization as well as how they present and communicate investment deals—especially if they want to keep their current clients loyal while bringing new ones onboard.

In fact, some experts feel that investor concerns are quite legitimate given the turbulent climates they’ve had to endure. Consider the fact that the financial crisis of 2008 is still fresh in the minds of many, and that heightened media scrutiny against the financial industry now has investors more skittish, and investors’ confidence is lower than ever before. It’s no wonder that being upfront and more transparent is a dire need for both seasoned investors, as well as those who are new to the game. And because the JOBS Act has made it possible for retail investors to participate in offerings once reserved for accredited investors, there will be many new players.

Adding to marketplace fears are advances in fintech and online investing technologies that are also fueling a greater demand for transparency. Les Andrews, CEO of Aitken Asset Management, states in a recent MorningStar.com article, “I think you’re going to see more and more demand from investors for details around underlying assets held in portfolios.  Both tech and fintech are shifting rapidly, contributing to the rise of savvier, more discerning investors.”

By transparency, investors mean clear, honest and direct communications that are provided on a consistent basis. They also want regular information about fees and/or other transactions related to their investment deals. And finally, they want easy to understand investment reports that provide them with clear insights on their financial performance.  

From the inclusion of an onsite glossary, to a detailed FAQ, below are four crucial steps to take in increasing financial transparency for your investors.

    1. Draft A Very Clear Fee Schedule

A full 35% of investors in a new study express concern over the dependability of the information they receive from their advisers. This extends beyond actual performance into the realm of fees and commissions charged.  Investors also frequently express concern over full transparency around alterations in fees and similar changes.

If you sense a potential opportunity to set yourself apart, you’re right on track.  By drafting a clear fee schedule and reviewing it with all new clients, you give yourself the opportunity to stand apart from the crowd, in terms of professional competence and transparency.  Ideally, you should do everything you can to communicate solidarity with your clients’ financial well-being. Transparency can play a considerable role in that.

When laying out your fee schedule, remember to keep it as immediately comprehensible as possible. The financial sector tends to be associated with long, mandatory slogs through miles of fine print. This is another opportunity to stand apart from the crowd and will likely make you seem much more upfront about transparency.

  2. Create a Detailed FAQ Page

Putting a detailed FAQ page on your site regarding your investment philosophy, fund history, the properties in your fund, and other frequent inquiries could simultaneously serve your aims in multiple ways.

For one thing, it would likely offer a large boost to your “transparency factor”, which alongside trust can be another criterion in an investor’s selection process. Creating a detailed FAQ page can powerfully (and conveniently) communicate to your investor base that their full comprehension of what’s being done with their money is a priority to you.

It’s a simple but powerful truism: people work hard for their money, and they tend to have plenty of questions in store for anyone who comes to them with an investment deal. If you can immediately refer them to a comprehensive FAQ page, it usually communicates a large degree of empathy for their position. You present yourself as having thought in advance (and in depth) about the core concerns of the investor, their primary inquiries, and the best ways to provide clear answers and transparency.

Common inquiries for your FAQ could center on financial barriers to entry, different deal tiers you have available to investors, financing options, and more.

    3. Have All Relevant Paperwork Readily Available

Similar to creating an FAQ, when you have all relevant paperwork easily available, a sense of transparency can be conveyed to the clients. You’re likely to appear professional and organized, but also eager to give your clients the info they need.

This has great potential to give your “transparency factor” a healthy lift. It can also provide an overall boost in your own efficiency and peace of mind, since the clients know offhand where to find all relevant documentation. Whether you’re dealing with the many and varied forms, which need signing in the course of investing and deal-making, a recent report you want to review with a client, or anything else of importance, you should have ready access to it once you’ve established its significance.

If you make a habit of this, you have the potential to make your day-to-day operation far smoother, and convey transparency to your clients, as well as an eagerness to quickly get them the info they need.

     4. Host An Onsite Glossary

The world of investing (and finance generally) can be full of jargon and convoluted language. Even for accredited investors, keeping up with new developments in the markets (not to mention fintech) can be daunting.

By hosting a glossary of finance and investment terms on your site, you present yourself as being a “one step ahead” kind of thinker.  However, in order to take full advantage of this transparency tactic, you should approach your glossary with a few guidelines in mind.

The primary litmus test for each glossary term should be, “How relevant is this to my investors’ concerns and needs?” The aim of your glossary is to clear up your clients’ questions and uncertainties and to increase your transparency in the process. However, this can only be accomplished if the terms you select reflect common misunderstandings or concerns among your investors. Be selective in your choice of terms. And of course, keep abreast of new terminology that investors are likely to be inquiring about.

A good rule of thumb to follow here is to keep track of how frequently certain words and terms come up as points of confusion. You could, for instance, have a threshold of five in place: “If five separate investors express confusion about the same term, I’ll add it to my glossary.”

If approached intelligently, an onsite glossary has the potential to greatly increase your clients’ sense of your professional transparency.

Summing Up

Along with trust, transparency can be a primary deciding factor for many investors when searching for advisers or investment opportunities. This will likely grow to be even more the case as fintech (and technology overall) makes information more quickly and easily accessible to investors.

The good news is that you have the opportunity to be proactive and to align yourself with this trend by reassessing and fine-tuning your own transparency level. You could do this with an on-site glossary of commonly misunderstood terms, by limiting or doing away with “valueless costs” such as commissions and upfront loads, and more.

The main thing is that you keep transparency in your mind as a primary ethic of professional care. By doing so, you can potentially stand out from your competitors and keep your clients satisfied and loyal to your organization for the long haul.

Do you have any questions? Speak with an Investor

Relations Representative.
Articles or information from third-party sources outside of this domain may discuss KBS Direct or relate to information contained herein, but KBS Direct does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party content, do not constitute an approval or endorsement by KBS Direct or NCPS of the linked or reproduced content. KBS Direct makes no representations as to the appropriateness of an investment in the KBS Growth & Income Real Estate Investment Trust REIT for ERISA plan fiduciaries and IRA owners and no investment advice is being provided.  ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in the REIT’s shares. The Growth & Income Real Estate Investment Trust is offered through North Capital Private Securities, member FINRA/SIPC.
Businessman working on Desk office

Reaping Rewards on Your Biggest Asset: Trust

With fintech now dominating the world of finance more than ever before, investors this year will have access to all types of highly-vetted, quality deals. In fact, fintech is one of the leading reasons why there’s been a tremendous spike in institutional quality investments that are now flooding the marketplace, and, even driving millions of dollars into the funding arena, from investors across the entire economic spectrum.

However, even with all of this funding activity, many investors are still left wondering about which deals are truly viable, and, about what platforms they can actually trust. That’s why cultivating a spirit of trust throughout your entire investor base should be at the top of your priority list, especially in 2018.

In fact some experts say that the “personal trust factor” may be the “make or break” deal for many finance organizations, since 47% of wealth advisory clients rank trust as their top criterion in selecting a financial advisor or investment partnership.

With this in mind, here are some of the top trends that are being used to build trust among investors, that may pay off richly for your organization this year and in the years to come.

1. Make Education a Top Priority

This point is unbelievably important. The world of finance is constantly shifting, and it’s practically impossible for any given individual to stay completely up to date. (This applies to finance generally).

When you make education a priority among your investors, you position yourself to accomplish several things simultaneously. For one thing, you work toward establishing your own expertise and credentials within your field. This is the starting point of earning financial trust. Unless your competence is established, no further progress can be made with a prospective investor.

But prioritizing financial education is about more than just establishing your own credentials. When education becomes a hallmark of your modus operandi, you’re extending implicit goodwill to your clients and investors. Don’t merely educate someone on the potential benefits of an investment. Educate them on its context in the wider financial environment, how it dovetails with or departs from their risk profile, and so on.

Your efforts will communicate the degree to which you value your investors’ financial health. And that factor is paramount.

2. Get Connected

Up to 40% of investors use social media channels as significant sources of investment information. The gap between tech-savvy millennial investors and traditional financial advisers is continuing to grow more quickly than ever. But this trend may also represent an opportunity for advisers who are willing to embrace modernity.

With 48% of advisers using social media daily for client interactions, it’s becoming clear that investors are increasingly prioritizing multiple points of connection. The reasons include the practicalities of moment-to-moment convenience, the psychological appeal of access to advice, and more.

Many of your clients and investors going forward will no doubt be millennials. Comprised of over 92 million people, the millennial generation tends to heavily prioritize the integration of technology and finance. Broadcasting your technical savvy through multiple social channels could be a ticket to enhanced revenue in the coming year.

3. Make Content Marketing A Priority On Your Site

Content marketing is generally defined as the inclusion of blog posts, articles, and other educational content within your wider site. And if you’ve neglected this tactic until now, you may want to consider shifting course immediately.
Content marketing has the potential to be tremendously effective in terms of ROI, especially in a niche as complex as the investment world. Having an ongoing blog on your site, with relevant financial or investment content, can go a long way toward establishing your expertise and industry authority.

And revisiting our first point about the vital importance of education, a robust content marketing element on your site also shows that you genuinely care about the education and financial aptitude of your clients and investors.

Content marketing also has the potential to increase your search engine results and drive web traffic. This is because every page of content added to your site represents an opportunity to target new keywords relevant to investors, including long-tail keywords and other SEO tactics. Combine that with the elements of industry authority and expertise mentioned above, and content marketing has the potential to be a major professional asset if intelligently deployed.

4. Always Align Yourself With Fiduciary Standards of Conduct

Maintaining a fiduciary standard of conduct simply means that you assume the legal obligation to act in your clients’ best financial interest at all times and in all decisions. Shocking though it may seem, a fiduciary standard of care was not established until the mid-twentieth century, with the Investment Advisors Act of 1940.

The act legally requires fiduciaries to place their personal interests below those of their clients. This distinguishes a fiduciary from a stock broker, for instance, whose primary role is to facilitate the swift exchange of securities, as opposed to overseeing a person’s broader financial health.

Proactive alignment with fiduciary guidelines and standards can speak volumes to clients and prospective investors. It represents an opportunity to show solidarity with your investors, and a chance to show that their long term wealth matters to you just as much as it does to them.

Summing Up

When it comes to an individual trusting their hard-earned money to the management of another person, few factors matter more than trust. This is especially true among millennial investors, who are increasingly educated and technologically connected.

By prioritizing your investors’ financial education, leveraging social channels, and integrating content marketing into your site, you can potentially reap rewards in the form of increased trust and exposure that can keep investors loyal to your organization for years to come.

But whatever else you do, remember the importance of maintaining a fiduciary standard of care for your clients. The knowledge that you are legally obligated to place their interests above your own could work very powerfully in your favor.

 

Do you have any questions? Speak with an Investor Relations Representative.

Articles or information from third-party sources outside of this domain may discuss KBS Direct or relate to information contained herein, but KBS Direct does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party content, do not constitute an approval or endorsement by KBS Direct or NCPS of the linked or reproduced content. KBS Direct makes no representations as to the appropriateness of an investment in the KBS Growth & Income Real Estate Investment Trust REIT for ERISA plan fiduciaries and IRA owners and no investment advice is being provided. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in the REIT’s shares. The Growth & Income Real Estate Investment Trust is offered through North Capital Private Securities, member FINRA/SIPC.