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Second-Opinion Financial Advice

Second-Opinion Financial Advice

Product line extension is a tried-and-true approach for leveraging an existing infrastructure, brand and capability set into new revenue generation. As financial advisors prepare for a future of tightening margins amid greater competition, offering individuals a second opinion on their current financial plan and investment strategy may be one attractive new business development opportunity to consider.

Why Individuals Need a Second Opinion

Individuals may pursue a second opinion for several reasons. Chief among them is the desire to feel comfortable in the advice they are currently receiving. Much like individuals seek second opinions on important health-related issues, they will increasingly seek them when it comes to their future financial health.

The pursuit of a second opinion may also be rooted in either a lack of confidence in an individual’s current advisor (or their own self-direction), or a desire for help on a big decision, like when to begin taking Social Security or whether their retirement spending plan is realistic.

The Framework of a Second-Opinion Service

Individuals want to know, above all, that the second opinion they receive is objective and not designed as a marketing tool to up-sell that advisor’s other services. The language and process that an advisor creates for providing second opinions must give prospective clients confidence in the objectivity of that advice.

Such second opinion activities can, of course, lead to full-on advisory relationships, but they can only occur organically and at the individual’s initiative.

The next element in designing a second-opinion practice is deciding on the service menu. Here are some examples:

  • Assessing whether an investor’s current allocation is aligned with their goals, time horizon and risk profile
  • Identifying shortcomings or missed opportunities in an investor’s current financial plan or investment strategy
  • Evaluating an individual’s 401(k) investments and portfolio allocation
  • Assessing the sustainability of a retiree’s current retirement spending plan
  • Social Security planning analysis
  • Investment fees and expenses analysis
  • Measuring the tax-efficiency of a portfolio and retirement withdrawal strategy
  • Review of risk management issues, such as life and disability insurance coverage
  • Charitable giving strategy review

Investment professionals may have additional ideas, including those specific to their particular expertise (e.g., small business owners, executive compensation).

Finally, it’s important to have a fee schedule and process that will be clear to prospects. A flat fee or hourly rate shows individuals that the service is not simply a ruse to capture their business, while a defined process (i.e., first meeting is designed to gather data and ask questions about goals and preferences and the second meeting is to present analysis and suggested action steps) helps the individual understand what to expect by engaging that advisor’s second-opinion service.

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