By Lynn Vincent

Investments. These days, it’s almost a dirty word. As stock market trend lines worldwide resemble heart monitor readouts in a ward full of dying patients, advisors can feel hard-pressed to find anything more useful to tell clients than, “Um … hang in there.” It’s getting so bad that we recently heard one radio financial services analyst encourage listeners with this nugget: “There have been 30 bear markets over the past 100 years, but each one has been followed by a recovery.”

Well … yes. Otherwise there would have been only one bear market.

So what fresh tools and advice can advisors use to help clients manage their investments in today’s volatile markets? Without minimizing the importance of the industrywide move toward investing basics such as asset allocation and rebalancing, are there other innovative tools, techniques and suggestions out there? Yes. Where the bull market of the 1990s tended to promote tunnel vision (Step 1: Place money in equities. Step 2: Stand back and watch it grow), planners are now taking a more holistic approach to their clients’ financial welfare. This approach includes techniques such as returning to planning basics, probing clients’ feelings about money and using technology to help investors sail smoothly into the 31st recovery.

Even rich folks forget about the roof
Take certified financial planner Suzanne Joseph, for instance. She may have discovered the financial-services equivalent of dietary fiber. Principal of a registered investment advisory firm in Ojai, Calif., the least wealthy of her clients has a minimum of $2 million in assets under management. Yet, she takes the same basic approach with all of them. She spends time analyzing income, expenses, cash flow and net-worth statements. The idea: unclog their personal economies and get all financial systems running smoothly.

Why? Because, even with high-net-worth clients “income and expenses are the main driver of their whole financial life,” Joseph says. It’s an incorrect assumption, she adds, that people who have money already have a handle on these things. Wealthy people have problems with piling up money—or debt—just like anyone else, only with more zeros. Says Joseph, “Everybody can maximize and tweak,” a concept that’s particularly important today as investments are being hit hard.

So Joseph asks each client basic cash-flow, income and expense questions, giving special attention to sneaky, irregularly timed expenses. “Clients will leave out things like home maintenance, auto purchase prices and furniture. For example, if the roof isn’t leaking, it’s not going to be in the client’s numbers. So literally, I’ll have them put a certain amount every month into savings for these things that they aren’t spending money on every day.”

Planners are now taking a more holistic approach to their clients’ welfare.

Time and income structuring
Then there are income questions: Is their income maximized? For instance, are business owners’ services well packaged to maximize profits? If your client is a self-employed service provider, is his time structured to maximize earning, or is there significant wasted time?

In March, Joseph did a time analysis for an existing client who, as a result of the now-defunct tech bubble, was in the midst of a radical career change. The client (we’ll call her Christie) had just left a six-figure income job in the tech field. Since such plum positions now are scarce, Christie had decided to revisit her life—to reexamine what it was she really wanted to do. In the end, she opted for a career change: from tech exec to self-employed interior designer.

“To go from a nice, six-figure income to interior design work is a big financial change,” Joseph says. “As a financial planner, you just kind of say, ‘Gulp!’”

Christie had taken some courses in the art and craft of interior design, but those didn’t provide much training in running a business. That’s where Joseph stepped in to help, particularly with income maximization, service offerings and time management strategies. “It’s very common for interior designers to charge a straight hourly rate of around $100 an hour,” Joseph says. “But [Christie] had already come to the conversation with the idea of doing ‘room-a-day’ makeovers” at $500 for a four- to five-hour consultation.

In the end, Joseph designed a time and income structure that incorporated three room makeovers each week, plus time for individual consultations and higher-ticket work, as well as designated administrative and marketing hours. The result: Christie’s new annual income is $76,800—with 40 percent of every week still available to drive that number higher should she desire to do so.

Joseph, who says she built her business on “these extra things you can do for clients,” sees such financial planning as a win-win. “If my client does better, they have more to invest with me. Meanwhile, they are happier, more efficient, can retire earlier and may have more money to retire on.” Her technique—which she says is the “core defining difference” for her business—is a proven client-pleaser. Since adding investment management five years ago, Joseph has had to increase the minimum assets under management for new clients from $250,000 to $2 million just to keep up with her workload.

A matter of policy
John Appleton has also seen an increase in business at a time when many advisors are ducking behind the Cranium board-game display when they run into their clients at Starbucks. “Our business has actually increased over the past two years because of the bear market,” says Appleton, Lincoln Financial Advisors’ (LFA) regional director of investments for Oregon and Washington State.

That’s because of his firm’s holistic approach to financial planning during a time when investors are thirsty for sound advice. LFA rejects a product-oriented approach, never discussing specific investment products until after creating a comprehensive financial plan for clients based on what the firm calls an investment policy statement (IPS).

The investment policy statement “is a rare piece,” says Appleton, explaining that he sees few planners take this approach. “It’s a blueprint for the overall financial goals of the client, and it’s reviewed annually. It’s also a road map for both sides, and drives how we invest for our clients.”

The IPS is formulated using the client’s answers to a 12-page questionnaire that probes their emotions and expectations on such issues as rates of return, interest rates, inflation, risk tolerance, and on goals such as children’s education, family gifting and charitable giving.

“It’s not just numbers, but how does the client feel about these issues?” Appleton asks. “What are the goals that come from their heart? You can’t get a clear picture of someone’s investment needs without knowing how they feel about money. For example, a client might say, ‘We’re going to retire in five years, take our sailboat and sail around for 10 years, then tie up in the islands and live out our days.’ That’s a subjective statement, but it should drive investments. A client’s dreams affect the reality of what you do with their assets.”

The IPS helps both client and producer in a bear market, says Appleton, because the resulting investment strategy, based on the client’s expectations and future needs, is usually conservative. Also, since the IPS drives investment recommendations, the producer doesn’t have to hide from the client when the markets dip. “You can bring them in and say, here’s what we’ve done and why. Are you still comfortable with this?” says Appleton.

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