Practical analysis for investment professionals
26 March 2013

Five Ways Financial Advisers Can Add Value in a Low Interest Rate Environment

Central banks and their ongoing commitment to policies such as quantitative easing may be helping to prop up the global economy, but they are making life difficult for people who own income-producing financial assets — and for the advisers and wealth managers they turn to for advice. Managing the challenges of a low interest rate environment has been an ongoing concern since the 2013 CFA Institute Wealth Management conference in Boston. Here are five strategies that financial advisers have been able to employ for coping, as outlined at the conference:

  • Generate reports, especially when you aren’t generating returns. Clients accustomed to higher yields are regularly disappointed in low interest rate environments, but client reporting is an opportunity for managers to show where else they are adding value. Scott Welch of Fortigent highlighted the “shockingly bad” state of client reporting, noting that communication with clients is even more important in low interest rate environments than it is during bull market rallies. According to Welch, it’s “one of the few tangible things you can provide to prove you’re earning your fees.”
  • Know your tax laws and how to apply them. Greg A. Rosica of Ernst & Young and Beth Webel of PricewaterhouseCoopers explained the current tax situation for residents of the United States and Canada, covering different ways that tax laws apply to client assets. Effective portfolio management can be as much about avoiding losses as it is about generating returns, and a lack of tax planning results in needless expenses and forfeited returns. As Carl Richards, conference speaker and author of The Behavior Gap, put it:


  • Understand how to engage with clients on their own terms. Conference speaker April Rudin, CEO of the Rudin Group, cited a study showing that 98% of new wealth inheritors change financial advisers. Rudin explained that instead of seeing this number as a threat, advisers should view it as a tremendous opportunity for finding new clients. Advisers can benefit from this “money in motion” by establishing an online presence and using it to connect with clients and demonstrate their expertise. “If you’re not on the Internet,” says Rudin, “You’re almost invisible to younger generations.” You can watch Rudin’s full conference presentation online.
  • Safe withdrawal rate assumptions are built to survive most doomsday scenarios. Michael Kitces of Pinnacle Advisory Group walked delegates through published research on safe withdrawal rates for retirement portfolios and covered different types of retirement scenarios that included some of the best and worst market conditions of the past century. Kitces noted that while residents of Japan, Germany, and France would have needed to plan more conservatively for their retirement — it turns out that losing a World War or having one play out on your home soil has an adverse effect on portfolio assets — the widely accepted 4% “safe” withdrawal rate would have served most investors well.
  • Giving money away can generate positive returns. Advisers should encourage their clients to talk about charitable giving and enable ways for them to reach their philanthropic goals. During a session led by Jim Coutré of the Philanthropic Initiative, delegates learned that their own philanthropic efforts can be a way to demonstrate their firm’s integrity and commitment to service. Discussing your client’s philanthropic goals can be an opportunity to talk to the entire family — yet another way to build connections with the next generation of high-net-worth individuals.

Additional takeaways: J.P. Morgan strategist David Kelly shared his thoughts on the Fed’s zero interest rate policy and quantitative easing. Fidelity’s Andrew Fay explained how family offices need to balance customized services with economies of scale. For more conference insights, you can review a curated selection of tweets, articles, and videos.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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About the Author(s)
Peter M.J. Gross

Peter M.J. Gross is an online content specialist for CFA Institute, where he has managed blogs for the CFA Institute Annual Conference, European Investment Conference, and Middle East Investment Conference. Previously, he worked at Hampton Roads Publishing Company and at MFS Investment Management. Mr. Gross' articles have been published by Enterprising Investor, City A.M., Seeking Alpha, and The Hook, and his work has been highlighted by Real Clear Markets. He holds a BA degree from Connecticut College.

1 thought on “Five Ways Financial Advisers Can Add Value in a Low Interest Rate Environment”

  1. Pritosh Ranjan says:

    While rates may be low, there is no reason (or latitude) for advisors to run away from their primary task – generating returns!

    A side note on income needs: Maximising after-tax total returns is smarter than chasing income (and advisors in business know that pretty well).

    Low rates coupled with continuous money printing will continue to create asset price inflation first and goods,services and wage inflation will follow. Europe and China will provide us with sufficient noise and market pullbacks to buy risk exposures and sell volatility at sensible levels. More securitization will also be a theme and selectively adding exposure to real assets backed securities will make sense.

    The items highlighted in this article may be an icing on the cake but they are weak recipes for winning or retaining business.

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