As more advisors move toward fee-based, planning-driven relationships with clients, a familiar blind spot persists across many books of business: a portion of a client\u2019s assets sits outside the advisory relationship entirely, held in a non-advisory brokerage account at the same firm, or at another institution altogether. A legacy mutual fund position, a handful of individual securities, equity compensation, or an annuity purchased years ago often predates the advisory relationship and was never folded into it. The assets in advisory accounts receive an allocation strategy, a rebalancing cadence and regular review. The non-consolidated assets may be reviewed less frequently and can be easier to overlook in the context of the client\u2019s overall financial picture.<\/p>\n
That gap is easy to rationalize in the moment. A $5,000 mutual fund position can seem too small to justify building a model around. Clients may push back when asked to revisit a position that isn\u2019t underperforming. And because many of these assets are often held outside an ongoing advisory arrangement, there may be fewer natural opportunities to revisit them over time. But easy to rationalize is not the same as easy to justify.<\/p>\n
Related:The Real Reason Your Best Prospects Say ‘We’ll Think About It’<\/a><\/p>\n Advisors often focus on the assets they directly manage, making it difficult to gauge how much of a client’s wealth remains outside the relationship. In conversations with advisors, I’ve found that outside assets can represent a larger portion of a household’s balance sheet than initially expected. When those advisors asked clients directly, a few found the actual figure was considerably higher, in some cases closer to 20%. What might explain the gap? Just as advisors can suffer from status quo bias and inertia, so too can investors. According to FINRA Investor Education Foundation\u2019s 2024 Investor Survey<\/a>, 25% of investors didn\u2019t make a single trade in their non-retirement accounts over the past year, and another 31% trade only one to three times. That matters, because clients aren\u2019t ignoring held-away accounts on purpose\u2014they\u2019re often just not thinking about them.<\/p>\n Left unaddressed, that blind spot carries real costs\u2014for clients and advisors alike.<\/p>\n Unmanaged Risk: A brokerage position that isn\u2019t part of an active strategy may not be evaluated in the context of a client\u2019s time horizon, risk tolerance or overall allocation. Over time, market movements and account activity can alter its role within the client\u2019s broader portfolio.Without a consolidated view, those changes may be less visible during the planning process. For example, an executive with restricted stock units vesting on a schedule, who also has a 401(k) heavily weighted in their employer\u2019s stock, could end up with 70% of their household wealth riding on a single ticker symbol. If that exposure is spread across accounts that the advisor can\u2019t see in one view, the risk will remain invisible until the market makes it visible.<\/p>\n Cash Drag: Brokerage sweep program cash sitting at near-zero yield, the accumulation of uninvested dividends and interest, and idle proceeds from a sale are all silent drags that can build up in accounts no one is actively watching. Vanguard research<\/a> shows the cost of unattended decisions goes further: it estimates that behavioral coaching, helping clients avoid emotional moves like panic-selling or sitting out recoveries, can add about 1.5% a year in net returns. Assets outside the advisory relationship don\u2019t get that coaching.<\/p>\n Fragmented Planning: When a portion of a client\u2019s assets sits outside the advisory relationship, tax considerations, liquidity needs and long-term goals tied to that money may not be coordinated with the rest of the portfolio. As a result, clients may end up with investment decisions that are managed separately rather than as part of a single, coordinated plan.<\/p>\n Incomplete Fee Capture: Advisors charging a fee on only part of a client\u2019s investable assets are typically responsible for overseeing only those assets. However, clients may still look to their advisor for guidance on how outside holdings fit within their broader financial picture.<\/p>\n Retention Risk: Assets that remain outside the advisory relationship can create gaps in client engagement and financial planning discussions. Today, clients have more independent access to research, self-directed platforms and AI-generated investment ideas than ever before; an advisor who isn\u2019t actively engaging with them across every account gives a competitor or the client, a reason to act without them.<\/p>\n Related:Trump Accounts Could Redefine Wealth Management<\/a><\/p>\n The risk is real. When a client meets with a certified public accountant, attorney or insurance agent and held-away assets come up, that professional may refer the client to another advisor, and many have referral partnerships in place. If the advisor isn\u2019t talking to the client about every account, someone else may be.<\/p>\n