5 Tips for a Successful Financial Advisor Podcast

by | Mar 9, 2021 | Advisor Blog

Home > Advisor Blog > 5 Tips for a Successful Financial Advisor Podcast

5 Tips for a Successful Financial Advisor Podcast

Reaching current and potential clients is dependent on finding the right method to catch their attention. As financial advisors continue to ensure they’re engaging with clients safely through digital mediums like social media and video conferencing, podcasts are another great way to showcase your expertise and share important insights in investment strategies and challenges. But with approximately 850,000 podcasts — and counting — available to listeners, it can be hard to stand out. For advisors looking to launch their own podcasts, here are a few simple tips to ensure each episode is planned and executed effectively.

Ensure Compliance

First, check with your company to confirm that producing a podcast adheres to corporate policies and current regulations. There are a number of guidelines, including those from SEC and FINRA, that must be abided by to ensure content is not presented in a misleading way. Keeping open communication with your firm and your compliance team about the topics you’ll be covering is your first step in developing a podcast successfully without risk of non-compliance.

Find Your Target Listener — and your voice

Consider the fact that there will be an estimated 117.8 million people in the U.S. who will listen to a podcast on a regular, monthly basis this year — a roughly 10% year-over-year increase. There is incredible potential to capture some of those listeners and build your audience. But who exactly is your target audience? Will you be speaking primarily to other professionals and thus free to use more technical terms? If you’re giving advice to new investors, the language should be simpler and the basic concepts outlined at a slower pace. When you know your audience ahead of time, you can write in a way that speaks to their differing interests and levels of investing experience.

Understanding your audience is just part of the strategy to build an effective podcast. You will also want to establish your own personality and brand. Are you naturally funny and light-hearted or do you approach topics you care about passionately? Make a point of jotting down a few key words that represent who you are and what persona you want to present on your podcast. This persona may evolve, but there should always be an overall identity to guide you from episode to episode. When you wander too far from your established voice, it can be confusing for listeners who expect a certain personality when they tune into your podcast.

Be Consistent

This brings us to our third tip to successful podcasting: be consistent. This is crucial when planning the actual content of the podcast and that strategy begins with choosing the format of the show. How will you discuss your topics on each episode? Will it be a solo “monologue” style podcast? This format is a tried-and-true approach, allowing the host to workshop and curate the message carefully. Panel discussions can produce lively, dynamic shows if well-moderated. Interview podcasts can garner attention with prestigious guests, but it can be challenging to book relevant and interesting guests week to week.

Whichever format you choose, if you are to maintain a regular schedule of episodes at a high level of polish — an absolute must to retain and grow your audience — you cannot scramble to write an episode every week. Ideally, try banking your content and have a few episodes planned out ahead at all times. Outline your first four topics and with every point you wish to make, list a few supporting points for easy reference. Depending on your format, you could write out a full script for each, or just use the outlines as guides for impromptu discussion.

If you’re wondering where the basis for your show’s content comes from, look no further than your experience as a financial advisor. Bring your expertise in understanding your clients and their needs by highlighting the issues that you’ve found are the most pressing for them right now. Many excellent techniques exist for finding topics, but a simple brainstorming list is a good place to start. Develop ideas in any order you like with nothing off-limits, and then organize the ideas into different categories and prioritize from simplest to most advanced. At this stage, aim for as long a list as possible so you can cut ideas and still have plenty to choose from. Part of the joy in listening to podcasts is the ritual and the comfort in their regularity, and your success as a podcaster will hinge on providing a consistent release schedule that can be supported by planning your content in advance.

Invest in the Right Equipment

One of the most important steps in creating a podcast is to use the right equipment. When the only thing that is connecting you with your audience is the sound of your voice, production value is key. Investing in a high quality microphone and editing software can be the difference from a mediocre listening experience to an enjoyable one that reflects your professionalism. If your budget allows for it, consider acoustic paneling for your walls as well. There’s no reason to overspend and buy the most expensive equipment and accessories on the market, but putting money towards the best items you can afford to support the production quality of your show will go a long way in building listeners’ confidence and trust in you.

Spread the Word and Publish

With your content planned and the equipment ready, you’ll also want to consider how you will market your podcast. Your current clients should be the first to know, and they can be encouraged to share your podcast with their inner circles. Make sure to announce the podcast and instructions on how to find it in all of your upcoming client communications and spread the word through your social media channels.

While carefully preparing to debut your show, research available podcast hosting services to know where and how to publish your work. Be sure that all of the major podcasting apps, like Spotify and Apple Podcasts, also carry your show once you’ve uploaded it to your chosen hosting platform. If you’ve properly planned your topics and you can boast consistent quality in content and production values, you’ll already be a cut above the crowd. By implementing a thoughtful strategy at the very beginning stages of your podcast project, you’ll be more likely to find a system that works for you. This will help you expand your position as a financial services thought leader and manage this valuable method of connecting with current and prospective clients on a long-term basis.

Christopher Crawford is the Director of Advisor Relationships for the Buffalo Funds. He has 10 years of experience in the financial services industry, previously holding positions at Invesco, IMA Financial Group, and Arthur J. Gallagher. At the Buffalo Funds, Christopher works with investment consultant relations, key account management, institutional distribution and client service. His main goal is to partner with advisors to bring business building ideas and provide unparalleled customer support to their business, always striving to make it easy and reliable to work with the entire Buffalo Funds investment team. Christopher received an M.B.A. from Washington University in St. Louis and a B.S.F.A. from Southern Methodist University. He also holds licenses for the Series 7, Series 63, and Series 65.

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Christopher Crawford
Director, Advisor Relationships
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Social Media Best Practices for Financial Advisors

by | Jan 27, 2021 | Advisor Blog

Home > Advisor Blog > Social Media Best Practices for Financial Advisors

Social Media Best Practices for Financial Advisors

The challenges of the pandemic have been numerous, but for financial advisors, the real test has been to find ways to improve and foster client relationships. In-person meetings, once the standard in building these relationships, have become less frequent to reduce the spread of the coronavirus. It is therefore crucial for financial advisors to increase their digital literacy and establish new ways to engage with current and potential clients.

We’ve already considered how to grow your practice as a response to COVID-19, as well as how to improve our approach to video conferencing, but there’s another avenue to reach people: social media. With more people on social media than ever before, it has become essential to elevate social media profiles and understand the most effective ways to leverage these platforms to reach clients.

Compliance Check

Before posting on social media, ensure that you are complying with your company’s social media policy. These policies should act as a roadmap to what can and cannot be discussed on all social platforms. Because non-compliance carries significant legal and reputational risk for an organization, it is always wise to consult internal policies before publishing anything. If no social media policy exists, consider the following:

  • Always act as a good representative for your firm.
  • Use common sense when posting. Do not share confidential information.
  • If a statement is your personal opinion, clarify your position as an individual, not as someone speaking in an official capacity on behalf of your firm.
  • Ask management if in doubt.

Know Your Audience

With more than half of the financial advisors in a recent study reporting increased activity on LinkedIn and/or Twitter in the last year, it is clear that more advisors are recognizing the need to build a strong social media presence to expand business opportunities. By understanding which demographic is most likely to be engaged on which social media platform, you will be able to focus your posting efforts and develop connections strategically. Here is a breakdown of the typical audience per platform.

Facebook

Facebook remains the second most used social media platform in the U.S. Only YouTube tops it in usage. According to Pew Research, 69% of adults in the U.S. are on Facebook, with 74% of those users visiting the site at least once a day. In terms of demographics, there is heavy usage across the board.

Instagram

Behind Facebook in terms of daily logins is Instagram, with 63% of users logging in at least once per day. The platform also skews younger.

Twitter

Twenty-two percent of adults use Twitter. Because of its 280-word limit, Twitter posts are most effective to distribute timely news items or customer service responses.

LinkedIn

Though only 22% of U.S. users visit LinkedIn daily, this platform is useful because it is so targeted to professionals. The demographics reflect this, with a majority of users between 25-49 years old.

Focusing on the “Social” in Social Media

Whether speaking to millennials or older clients, adding personal touches to your social posts is always valuable. A statement that starts out with a heavy pitch about your services is an instant reason to delete or ignore a message. In the same sense, remaining authentic is key. Speak to your personal experience, and if you are exchanging direct messages with an existing or potential client, pay attention to that person’s background and interests. There is nothing worse than receiving a message that reads like a template that has been sent to dozens of other people.

Another easy way to maximize engagement is to respond to your news feed. Whether you see a birthday or work anniversary reminder, an important status update, or a news link that your connection has shared, take the time to reply specifically to these updates in your news feed. This demonstrates a personal interest in things that matter in your clients’ lives and will stand out to that person when engaging with them on an individual level.

Staying Organized

Developing a social media content calendar is the best way to stay organized when posting on various platforms. It allows you to plan and schedule relevant content in advance. A calendar also helps with staying consistent with how frequently you post, which is another key to creating an impactful social media presence.

The tools used to create a social media content calendar can be as simple as an Excel sheet that outlines each day of the month and what you will post on those days. There are also free scheduling applications, like Later, Hootsuite and Buffer, that can automatically publish posts on the days that you designate. Planning ahead with the help of a social media calendar and scheduling tools are two easy ways to minimize the stress of managing your social posts.

Posting Cadence

There is no magic formula for how often you should be posting on your social channels. Posting cadence varies from platform to platform, but the most important tip is to uphold the quality of your content and remain consistent with your posting schedule. If publishing social media content three times a week works best for you and your organization, then make that your goal. If this is your first time managing a social media account, start small, like posting twice a week on one platform, and slowly increase the volume of posts and the number of social media channels you use.

Two good places to start are LinkedIn and Facebook. On LinkedIn, 95% of posts generally show a decline in the number of clicks after 5 p.m., with the highest engagement occurring from Tuesday to Friday between 8 a.m. and 2 p.m. On Facebook, because their algorithm is constantly changing, the top priority is on creating quality content. Consistent engagement on posts also occurs from Tuesday through Thursday between 8 a.m. and 3 p.m. The hours before 5 a.m. and after 5 p.m. are timeframes to avoid posting, as engagement is lower.

Assess and Refine

Social media is constantly evolving, and so the strategy behind it must change as well. Though the best practices outlined here will serve as a strong foundation, in order to capture engagement continuously among existing and potential clients, you must be willing to revisit your content strategy and refine it as you go.

Christopher Crawford is the Director of Advisor Relationships for the Buffalo Funds. He has 10 years of experience in the financial services industry, previously holding positions at Invesco, IMA Financial Group, and Arthur J. Gallagher. At the Buffalo Funds, Christopher works with investment consultant relations, key account management, institutional distribution and client service. His main goal is to partner with advisors to bring business building ideas and provide unparalleled customer support to their business, always striving to make it easy and reliable to work with the entire Buffalo Funds investment team. Christopher received an M.B.A. from Washington University in St. Louis and a B.S.F.A. from Southern Methodist University. He also holds licenses for the Series 7, Series 63, and Series 65.

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Christopher Crawford
Director, Advisor Relationships
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Video Conferencing: Taking a Personalized Approach to Virtual Financial Advice

by | Nov 2, 2020 | Advisor Blog

Home > Advisor Blog > Video Conferencing: Taking a Personalized Approach to Virtual Financial Advice

Video Conferencing: Taking a Personalized Approach to Virtual Financial Advice

Most of us have become accustomed by now to using a video conferencing platform. Whether it’s for weekly check-ins with family or for regular updates with colleagues and team members, video chats are part of our new way of life. They’ve also become a standard method to engage with clients. With every indication pointing to the sustained impact of a long-lasting pandemic and with COVID-19 safety measures in place in many parts of the world, tapping into the benefits of video conferencing is more important now than ever before in establishing a personalized connection with existing and potential clients.

The Benefits of Video Conferencing

There is a range of benefits to using video technology to communicate with your clients. The number one benefit is that it helps you maximize your time. With no travel and little set up required, each client meeting occurs at a predetermined, scheduled time. It also does not matter where you or your client is located. You could be speaking to someone on the other side of the country from the convenience of your vacation home. This flexibility also extends to your ability to cope with emergencies. If someone calls you in the middle of the night to handle an important transaction, you are prepared to resolve the issue immediately. On the other side, clients experience similar benefits in terms of time and convenience. There is great comfort in knowing that your financial advisor is only a virtual chat away if you need advice or assistance at a moment’s notice.

Tips and Tricks

The convenience that video conferencing offers to others is why maximizing the capabilities inherent in virtual chats can help showcase your expertise to new and existing clients. Here are a few simple ways to leverage this tool so that it works to your advantage:

Think in High-Definition

Start by assessing your current equipment. Do people constantly say that they are unable to hear you during a call? Does your image look dark or blurry on the screen? The person on the other end needs to see and hear you clearly so that conversations are seamless and coherent. Consider upgrading your hardware and equipment to get the highest video and audio qualities. This may include investing in an updated webcam, a spotlight or ring light for your workstation, and a new headset or microphone. You should also consider your internet speed to ensure the video feed isn’t grainy or pixelated and comes across smoothly without interruption.

Maintain a Professional Appearance

Your clients look to you for sound advice and a reasoned approach to tough financial decisions. This is where appearance does matter. Looking put together and being properly dressed is a small way to convey professionalism. Similarly, there is nothing as distracting as a pile of clothes or dishes behind you when speaking to someone by video chat. Setting up a dedicated office space may be impossible, but ensuring that any part of your room that is visible on camera is free of clutter creates a sense of order. It also sets the stage for a calm and productive conversation with your client.

Stay Engaged

Multitasking may be tempting, but it’s noticeable when someone is caught checking his or her email or phone during a video conference call. Think of your in-person meetings. You are unlikely to scroll through your messages on your phone when someone is in front of you. Stay active as a listener and show the person you are speaking with that their concerns are your priority.

Know Your Demographics

During these challenging times when virtual communication is often the safest, creating a personalized touch to every client relationship is crucial. While it’s important to have all the basic mechanics in place to conduct a video conference that is free of any technical issues or distractions, it is also just as vital to measure a person’s comfort level with new tools and to understand how each individual engages with technology.

For older adults, video conferencing may not be the most intuitive form of communication. This can be a source of huge frustration. There are three major obstacles to digital adoption: access, skill, and intimidation. As such, it’s up to financial advisors to support these clients with additional resources. Help set up a new account on a user-friendly conferencing platform or ask if they would like recommendations on a password reminder that can securely store their passwords. If a client is unaccustomed to using technology to communicate, be patient and review each step carefully. Create a graphic or simple outline that breaks down each step of a process that may be difficult to follow, such as logging into a platform or online tool. You can also try helping older clients overcome feeling intimidated by new technology by installing any required applications on a tablet and dropping it off to them to use. Whether it’s spending extra time to explain part of a digital process or it’s physically providing the necessary tools for them to use, you can offer the right support to remove video conferencing barriers for older adults.

On the other hand, younger clientele are likely to be more tech savvy. They consume digital content regularly and want more authentic connections. Stand out from other casual online interactions by being an asset to these clients. Frequent, brief communication is key, as are check-ins that go beyond the numbers in their portfolios. Take the time to understand their interests and find ways to engage with them in a meaningful way. Did a client mention on your video call that they were just listening to a podcast about growing herbs at home? Follow up your call with an email that includes links to books they can order online to help create an indoor garden, and then drop a care package of different seeds in the mail for them. It’s small, personal gestures that go beyond a video call that will help you establish a connection.

Video Conferencing is Here to Stay

With virtual forms of communication becoming the new standard within the financial industry, now is the time to refine your strategy when it comes to video conferences. The convenience and flexibility that video chats afford to both advisors and their clients are compelling benefits, but understanding the mentality and needs of the other person behind the screen will be the key to engaging successfully with all clients.

Christopher Crawford is the Director of Advisor Relationships for the Buffalo Funds. He has 10 years of experience in the financial services industry, previously holding positions at Invesco, IMA Financial Group, and Arthur J. Gallagher. At the Buffalo Funds, Christopher works with investment consultant relations, key account management, institutional distribution and client service. His main goal is to partner with advisors to bring business building ideas and provide unparalleled customer support to their business, always striving to make it easy and reliable to work with the entire Buffalo Funds investment team. Christopher received an M.B.A. from Washington University in St. Louis and a B.S.F.A. from Southern Methodist University. He also holds licenses for the Series 7, Series 63, and Series 65.

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Christopher Crawford
Director, Advisor Relationships
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Growing Your Practice During COVID

by | Sep 28, 2020 | Advisor Blog

Home > Advisor Blog > Growing Your Practice During COVID

Growing Your Practice During COVID

2020 has been dominated by COVID-19, with the effects of the global pandemic reaching across every industry to change the way we fundamentally operate. While there have been many articles highlighting the economic woes in the U.S., on an individual level, there is no downplaying the serious impact this health crisis has had on personal finances. In a recent survey by Prudential and Flexjobs, one-third of respondents had lost all of their income as a result of the pandemic, while nearly half do not have enough emergency savings to last another six months.

This economic climate will certainly have a long-lasting impact on investment behaviors. Based on study findings that were released at the Federal Reserve Bank of Kansas City’s annual conference in September, this pandemic could very well create pessimism among investors that is “likely to dampen risk-taking and economic output for decades.”

During these challenging times, growing a financial advisory firm remains a study in the fundamentals: understanding your clients and building on relationships. These are skills that all financial advisors work to master, but against the background of a global pandemic, that puts people at risk simply if they are within six feet of each other, we’re seeing an accelerated shift in digital opportunities to engage with clients more effectively to drive business.

Financial Advice Goes Online

Digital tools like video conferencing that support online communications with clients are not new to financial advisors, but their increased adoption into everyday workflows is certainly a shift in “business as usual” post-COVID. This goes hand-in-hand with the need to connect with clients on a more frequent basis. When faced with economic uncertainties, people require even more reassurance that their investments are in good hands. Combine this with the added isolation of working from home and the pressures of juggling homeschooling or care for children and the elderly, and it’s easy to see why financial advisors may find themselves in a position to provide more emotional support to their clients — in addition to their usual conversations about portfolio performance.

This is why it’s critical to stay up-to-date on the latest software and tools so that communication occurs on the platforms where clients are likely to engage. Phone calls and texts are still effective ways to stay in touch, but Zoom, Google Meet, and Skype are becoming some of the most commonly used applications to enable video calls for valuable “face-to-face” meetings.

A Multichannel Approach

To maximize engagement with potential clients, financial advisors and companies must employ a multichannel strategy that leverages diverse methods of communication, including email, phone, and video. In a recent survey by Fidelity, those who used such an approach reported the most prospecting success, with 74% of respondents noting average or above average results. Of the advisors who only used email to prospect, three-quarters of them reported below average results. Monthly email newsletters and individual phone calls or video chats are all good ways to create multiple points of contact. In the absence of traditional, in-person meetings, connecting through alternative methods is crucial to growing potential business.

The Power of Social Media

Social media is also an important element in any multichannel marketing strategy. Since the start of the pandemic in the U.S., around 50% of American adults were using social media more, according to a recent Harris Poll. Facebook, LinkedIn, Twitter, and Instagram are all platforms where potential clients can be found. With Google searches for “coronavirus money help” increasing by 3,600% at the beginning of the pandemic, financial advisors can fill the need for more digital resources by creating material about loan programs and personal financial support that can be distributed across social media channels. Podcasts, blogs, and infographics are all examples of the types of content that can be used to position financial advisory firms as authorities on the latest information impacting personal finances — especially when people are spending more time online.

To increase the value of your content, think about repurposing each piece of collateral in different ways across multiple social media platforms. Holding a webinar over Zoom? Promote the live session through LinkedIn and Twitter, record it and then use a clip in an Instagram post that leads prospects to your site for instructions on how they can download and watch the on-demand version.

Building a Path Forward

The world has changed, but the values held by financial advisors and firms remain the same. Creating and fostering authentic relationships with clients is still the most important objective for advisors, even if a majority of those connections now takes place virtually. In times of market volatility, applying fundamental skills to a flexible marketing strategy that leverages technology and multiple channels of communication will lead to the comprehensive emotional support and financial advice that current and potential clients need right now.

Christopher Crawford is the Director of Advisor Relationships for the Buffalo Funds. He has 10 years of experience in the financial services industry, previously holding positions at Invesco, IMA Financial Group, and Arthur J. Gallagher. At the Buffalo Funds, Christopher works with investment consultant relations, key account management, institutional distribution and client service. His main goal is to partner with advisors to bring business building ideas and provide unparalleled customer support to their business, always striving to make it easy and reliable to work with the entire Buffalo Funds investment team. Christopher received an M.B.A. from Washington University in St. Louis and a B.S.F.A. from Southern Methodist University. He also holds licenses for the Series 7, Series 63, and Series 65.

Click here for links to each fund’s holdings. Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security.

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Christopher Crawford
Director, Advisor Relationships
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Cybersecurity: What Financial Advisors Need to Consider

by | Feb 11, 2020 | Advisor Blog

Home > Advisor Blog > Cybersecurity: What Financial Advisors Need to Consider

Cybersecurity: What Financial Advisors Need to Consider

The number of data breaches is skyrocketing. In the first half of 2019 alone, there were 3,800 publicly disclosed record breaches, 4.1 billion personal records exposed and an increase of 54% in the number of reported breaches versus the first six months of 2018. Although all industries have been affected, the volume of sensitive data and information that the financial industry stores makes them a prime target for hackers. For example, one of the most high profile data breaches of 2019 was with Capital One, resulting in 106 million records being accessed by a hacker. Financial advisors and firms need to be aware of cybersecurity risks, and need to be prepared with a strategy to prepare for these attacks.

The Importance of Cybersecurity

No matter the size of the firm, the sheer volume of sensitive materials that is handled by the financial sector every day means that cybersecurity must be prioritized to protect clients. According to the FBI, in 2018 alone, cybercrime victims lost $2.7 billion, but a data breach can cause firms and victims to lose more than just money. They also lose their sense of security. This translates to firms losing client loyalty and trust. The financial advisory business is built on this, so reassuring clients that their assets and information are secure is imperative.

To ensure that financial advisors and their firms are taking cybersecurity seriously, the Securities and Exchange Commission (SEC) and U.S. state securities regulators are starting to crack down on financial advisors’ cybersecurity practices. Along with regular inspections, the SEC is now performing cybersecurity examinations. They are also charging firms that fail to keep client data safe. In September 2017, New York-based Voya Financial Advisors was instructed to pay the SEC $1 million to settle charges regarding a data breach that compromised customers’ personal information.

The Securities Industry and Financial Markets Association (SIFMA) is also getting involved in cybersecurity, and has worked with financial firms and government regulators to create simulations of real cybersecurity attacks. Cybersecurity certification is also being developed for firms and advisors, such as the Systems and Organization Controls certificate developed by the American Institute of Certified Public Accountants. This certificate validates a firm’s administrative, technical, and physical controls over cybersecurity.

Building a Cybersecurity Strategy

Cybersecurity is not a one-time cost. To ensure that advisors are aware of the risks, and that clients’ data is continuously protected, firms need to build, maintain, and invest in a long-term cybersecurity strategy. Key considerations for these strategies include the following:

Continuous Training and Procedural Updates

Much of cybersecurity prevention comes down to arming staff with enough knowledge to recognize threats and understand how to deal with them. Along with obtaining general cybersecurity certification, ensure that all financial advisors receive continuous in-house training on best practices and procedures, and on how to spot cyberattacks and wire fraud attempts. Criminals know the vulnerability of human error and will frequently attack the human element first. Unfortunately, most firms focus on technology solutions as the primary line of defense and staff training as the last. Keep all employees aware of current cybersecurity crimes and new data breach techniques. Update firm guidelines and processes constantly so that they incorporate the latest technologies.

Vendor Reviews

With their regular inspections and tests, the SEC has uncovered a common vulnerability across firms that can be easily rectified: third-party vendors are often overlooked in assessing potential cybersecurity threats. Although 63% of data breaches begin from a third-party vendor’s vulnerability, only 52% of firms have formalized security practices for vendors, making this an important area of improvement when preventing cyber crime. Every new digital tool adopted by a financial advisor increases the risk of a cybersecurity attack.

Ask about vendors’ cybersecurity plans, their vulnerability testing, and what protocols they have in place if a data breach occurs. Technology vendors should maintain fully separate hosted environments across multiple data centers, use strong encryption and data masking, and be able to show that they regularly test and audit against security best practices. Along with these technological security questions, ask about the vendors’ physical security controls at their tech company offices or data centers. These can include 24/7 security and video surveillance, backup power generators, and data center compliance with standards like Tier IV, SOC 2, or ISO 27001.

Establish Electronic Communication Rules and Protocols

Phishing tactics are one of the main causes of security breaches. They are also one of the simplest types of breaches to prevent. Phishing is when hackers email a target from a known sender, use personal information pulled from public profiles and websites, and trick their target into divulging sensitive data, or in some cases, money.

Within the firm, establish rules about electronic communication and protocols for protecting clients’ records, including the use of social media, and remote access to emails and customer information. The SEC has regularly observed employees storing and maintaining customer information on personal laptops, which do not have the same security measures in place as firm computers. This seemingly simple act can expose client data to hacking risks. Another measure that can be taken to protect clients’ data is to establish a two-factor authentication process for clients looking to access funds or information. This reduces the risk of cloud and account hacking.

As more communication is conducted over mobile devices, mobile security is becoming another area where special attention should be paid. A recent report by Wandera highlighted several security risks for financial services organizations through the use of mobile devices. These include phishing, with financial services firms experiencing more phishing attacks compared to other sectors (57% compared to 42% cross-industry), and man-in-the-middle attacks, which occurs when traffic from one device is intercepted, and then unknowingly read and possibly altered, before reaching its intended recipient. Man-in-the-middle attacks happen frequently through the use of risky hotspots and public Wi-Fi networks, so avoiding unknown networks is a good way to minimize this risk. Finally, a basic step that can prevent the release of valuable data, but is often overlooked by 1-in-20 financial services employees, is enabling a simple lock screen on devices.

Perform Vulnerability Tests

Once written response procedures are established in the event of a breach, regular tests of these procedures can help refine and adjust processes and systems as needed. Along with the tests provided by the SEC, firms must perform their own consistent testing for vulnerabilities. Be prepared to fix the problems that are revealed through these tests. Using real-life scenarios also helps engage employees in cybersecurity protocols.

Prioritizing Cybersecurity

Security breaches and risks will continue to be a pressing issue in 2020 for the financial services industry. With a formal cybersecurity strategy in place that incorporates the four factors outlined here, financial advisors and firms can be better prepared to respond to threats.

Christopher Crawford is the Director of Advisor Relationships for the Buffalo Funds. He has 10 years of experience in the financial services industry, previously holding positions at Invesco, IMA Financial Group, and Arthur J. Gallagher. At the Buffalo Funds, Christopher works with investment consultant relations, key account management, institutional distribution and client service. His main goal is to partner with advisors to bring business building ideas and provide unparalleled customer support to their business, always striving to make it easy and reliable to work with the entire Buffalo Funds investment team. Christopher received an M.B.A. from Washington University in St. Louis and a B.S.F.A. from Southern Methodist University. He also holds licenses for the Series 7, Series 63, and Series 65.

Click here for links to each fund’s holdings. Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security.

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Christopher Crawford
Director, Advisor Relationships
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Improving Client Experience Through Better Risk Tolerance Assessments

by | Nov 27, 2019 | Advisor Blog

Home > Advisor Blog > Improving Client Experience Through Better Risk Tolerance Assessments

Improving Client Experience Through Better Risk Tolerance Assessments

Heading into the end of the year, investors may be starting to rethink their investing strategies and re-assessing their risk tolerance.

Though the U.S. stock market made it through September and October — notoriously bad months for the market — recent polls of economists and American voters indicate great concern about a looming recession. This means that advisors need to be in tune with the changing needs of investors and actively assess the risk that they are willing to take in a potential bear market. Inaccurate, confusing, or outdated investment risk assessments could result in investors with unrealistic expectations and pose a major risk for financial advisors.

Risk Perception

Risk tolerance, which is an investor’s willingness to withstand variable investment returns, is only a small component of managing risk for clients. Investors may believe that they have a high risk tolerance and are able to handle downturns in the market, but they may not actually understand how to be prepared in a bear market. This is why advisors need to consider a holistic view of a client’s perception of risk. Goals should be evaluated frequently to ensure that investments match time horizons. Advisors should also assess the investors’ understanding of risk. Do they know what percentage of their investments are stable, and which may be lost in a market downturn? Although they may feel prepared to take risks while the markets are looking up, that perspective can quickly change when the market takes a dive.

Other risk determinants that should be considered by an investor are risk capacity and risk perception. Risk capacity relates to the amount of risk that the client can actually afford to take or needs to take to reach certain financial goals, regardless of their perception of risk. This capacity can change based on age or lifestyle factors, and it needs to align with an investor’s time horizons and goals. Risk perception is psychological, and refers to how an individual will actually process financial losses. Although investors may feel like they can and want to take risks, recessions create a very different risk assessment, as investors will see what these risks look like in actuality. Poor investment advice in a market downturn can result in legal liabilities for advisors and could turn investors away from the market completely.

Aligning Investor’s Risk Tolerance

Advisors need to be aware of a number of factors in order to set investors up for success. Alignment on the goals of the investment funds, including the time horizon, will be especially important when deciding the mix between equities and fixed income investments. Typically, younger investors have longer time horizons for their investments, as retirement can be close to 50 years away. This allows them to take more risk and invest a higher percentage in equities. In a potentially unstable market, though, it is still important to ensure that their investments are not completely lost. Traditionally, a balanced portfolio of equities and fixed income, with a diversified portfolio, will ensure that investors reap the benefits of the bull market, but are prepared for a downturn. Consider other large purchases that the investor may want to use the fund for, such as a child’s education. These may have shorter time horizons and the investments will need to be adjusted accordingly.

Older investors may be more hesitant to take large risks with their money. With the 2008 recession still on their minds and their retirement age approaching, older investors tend to be more conservative with their money. Although this was commonly the best approach, as life expectancies increase, this strategy is changing. In order to reach certain financial goals or maintain certain lifestyle expectations, older investors may want to consider a riskier approach to investing. Advisors need to understand an individual’s expectations with their money first, before explaining the factors behind risk and reward.

Improving Risk Assessments

Strategies and technologies are evolving to better assess how risk is viewed by investors. Risk questionnaires are becoming more robust, yet less complex, to ensure that investors understand what is being asked of them. They also are being developed to distinguish between the attitude towards risk and the investor’s ability to actually take on risk. This relies on psychometrics, which is the science of measuring mental capacities and processes. Instead of defining comfort level rigidly as conservative, moderate or aggressive, advisors are also starting to rely on risk numbers to form a more complete picture of their clients’ abilities to take risk, their comfort with risk and the amount of risk that they will need to take to reach their goals. These risk number profiles assign investors a number on a scale ranging from zero to 100.

Risk assessments also need to change based on technologies and how investors are accessing these questionnaires. Software programs are emerging that have the capabilities to delve deeper into comfort levels, resulting in a clearer risk assessment. They are also becoming more user friendly and accessible, allowing the average investor to complete their portion of an assessment on mobile devices.

Although questionnaires and advising software are evolving to improve the client experience, advisors also need to evolve to meet the needs of investors. Banks are increasingly offering robo investing, where clients receive minimal personal connection when making their investment decisions. This means that, in order to maintain client connections, an advisor’s personal approach needs to add value for the client. Communication and understanding can go a long way in ensuring that an investor is happy. This, in tandem with scientifically crafted questionnaires, can help advisors better assess a client’s true risk profile and potentially deliver better outcomes.

Preparing For What’s Ahead

No matter the market outlook, advisors and investors need to be prepared for downturns. To maintain their clients’ trust, advisors need to prepare them financially and mentally for any market upsets that may take a toll on their investments, and by extension, their ability to achieve their financial goals. By considering the factors behind an individual’s risk tolerance and approaching risk assessment in a more personalized way, advisors can be more successful in providing a portfolio mix that specifically suits each client’s needs and expectations.

Christopher Crawford is the Director of Advisor Relationships for the Buffalo Funds. He has 10 years of experience in the financial services industry, previously holding positions at Invesco, IMA Financial Group, and Arthur J. Gallagher. At the Buffalo Funds, Christopher works with investment consultant relations, key account management, institutional distribution and client service. His main goal is to partner with advisors to bring business building ideas and provide unparalleled customer support to their business, always striving to make it easy and reliable to work with the entire Buffalo Funds investment team. Christopher received an M.B.A. from Washington University in St. Louis and a B.S.F.A. from Southern Methodist University. He also holds licenses for the Series 7, Series 63, and Series 65.

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Christopher Crawford
Director, Advisor Relationships
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