A recent article from Brinker Capital discusses the concept of focused expertise and the importance for investors of finding it in a financial advisor.
“The lines between knowing about, knowing how, and being an expert can often become blurred and lead to negative consequences. Of course, the same holds true for financial advice and all the areas of expertise it entails,” the article notes.
The article outlines the CFA Institute’s definitions of various levels of knowledge as follows:
- Awareness: Cognizant that the topic exists and aware that it could have impact on the client
- Understanding: Basic knowledge of the topic, its ramifications, and impact on other areas of financial planning.
- Detailed understanding: Strong working knowledge of the topic and most of its ramifications.
- Expert: In-depth knowledge of the topic and all the ramifications.
The article contends that while most financial advisors have at least a strong working knowledge in one or more components of financial advice, it is difficult for them to gain expertise in all of them. For this reason, it says, most successful advisors rely on a team of experts to best serve their clients.
“Clients are best served with focused expertise which inherently requires a team of experts including strategic partners to focus on their specific task, portfolio managers, insurance specialists, trust attorneys, and the like. All of these individuals are led by a financial advisor who is aware of or understands all facets of financial planning yet focuses their attention and expertise on understanding their client’s values, goals, and aspirations. In doing so, they can build a plan that integrates their team of experts, putting the right people in the right place at the right time.”