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Financial Advisors as Life Planners?

Investing: Facing stiffening competition, they should offer clients more than just better-performing portfolios, expert says.


Financial planners should focus less on beating investment performance benchmarks and more on emphasizing broader "life planning" services for their clients, an industry veteran says.

"This profession is making the transition from delivering or selling products to offering advice, from packaging portfolios to monitoring goals, from financial planning to life planning," Roy Diliberto, president of the national Financial Planning Assn., told 450 financial advisors at the TD Waterhouse Partnership 2001 conference in San Diego last week.

Diliberto, a Philadelphia-based advisor, said planners who will survive and thrive in an increasingly competitive marketplace are those who believe there are more important things than making sure their clients' portfolios beat the Standard & Poor's 500 or other market indexes.

He told of a Sacramento colleague who "may have saved a client's life." This client, a doctor with high blood pressure, had said his goal was to get a higher return on his portfolio so that he could retire earlier. He planned to get there by working longer hours.

"This didn't sound like a goal, but a means to an end. After some probing, the client confessed that he wanted to get out of medicine because he felt like the stress was killing him," Diliberto said.

The financial advisor was the only counselor this man had seen about these issues, Diliberto said, and so it was left to him to point out that the doctor's fear of stress was creating much more stress.

After switching to half-time work rather than extending his hours, and reallocating his portfolio more conservatively, the doctor's health has improved and he no longer dreads the prospect of working a few more years, Diliberto said.

He said the planner "wonders what would have happened to this person if he had done the traditional thing and simply focused on working harder and creating a more aggressive portfolio. Odds are he would never have made it to retirement."

Small- and medium-size financial planning firms face stiffening competition from large financial institutions and from the swelling ranks of Internet-based advisory services, including those developing artificial intelligence to make investment decisions, Diliberto said.

Those developments will force more individual financial advisors to emphasize the human touch--and a broader approach to financial planning--if they want to prosper, Diliberto said.

"Why would a 70-year-old client with $4 million in his portfolio be afraid to take a vacation? Those are the sorts of issues we're really dealing with," he said in an interview after the conference. "Whether you call it 'life planning' or not, truly concentrating on a person's dreams and goals is simply the natural extension of what we do."


At the conference--which brings financial planners together with investment portfolio managers and other industry professionals--a number of panel discussions focused on stock picking in the new year and beyond.

Some highlights:

* International stock fund managers generally were bullish on Europe and Latin America, but skeptical about a Japanese market recovery any time soon.

Mark Yockey, manager of the Artisan International Fund, said he likes European financial companies whose asset management businesses are growing as Europe's budding "equity culture" gains from the shifting of the pension burden to the private sector.

Yockey, whose fund is down 1.1% this year but whose three-year average annualized return is 25.9%, also likes "quality" Latin American firms such as Wal-Mex (the Mexican Wal-Mart) and Brazilian oil conglomerate Petrobras. He said he sticks only with first-tier companies in emerging markets because there is too much risk in smaller firms in those markets.

Michael Levy, manager of Deutsche European Equity Fund, said he likes media firms such as Germany's Bertelsmann that are creating "global powerhouses."

Japanese companies, however, are embracing reform all too slowly, the panel agreed. "Japan is the only place in the world where you can have 150 core businesses," said Yockey, quoting a Wall Street colleague scornful of Japan.

* Technology fund managers, while insisting the sector holds plenty of promise long term, warned against looking to previous leaders, such as networking stocks.

"The trick is making sure your thinking isn't anchored" in a particular part of the tech universe, said Kevin Landis of the Firsthand Funds group. He said e-commerce specialists such as BEA Systems (ticker symbol: BEAS) and Siebel Systems (SEBL) and wireless-related firms such as TriQuint (TQNT) (which makes mobile-phone microchips) are among the innovators he likes in the beaten-down tech sector.

Walter Price of Dresdner RCM Global Technology said he has tried to tone down portfolio volatility by adding lower price-to-earnings multiple tech stocks such as transactions-processing firm First Data (FDC).

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