Firms need to articulate the interpersonal side of advice — Morningstar
New research by Morningstar shows there is a significant gulf between what financial advisers think investors want from working with an adviser and what investors actually value most.
Researchers asked 693 individual investors to rank a set of common attributes in order of importance. They also asked 161 advisers to rank the attributes in the order they thought investors found most valuable.
There were some correlation between the two groups. For example, advisers and investors both placed “Helps me reach my financial goals” in their top three most valuable attributes. But there were some notable differences too.
“Helps me stay in control of my emotions,” for instance, is ranked last by clients, despite a large body of research suggesting that behavioural coaching is the single most impactful service an adviser can provide.
Another example of a mismatch in expectations is the relative emphasis that clients and advisers place on maximising returns. It’s near the top of the clients’ list of attributes, but advisers put it at the bottom of theirs.
“This shouldn’t surprise anyone,” says the report. "For years, professional financial advice was promoted as a way to beat the market, and while financial and investing professionals might understand that this isn’t the case, changing the “returns first” perception won’t happen overnight.”
So what does all this mean for the advice profession? For the report’s authors, it emphasises the importance of advisers communicating their true value.
To quote the report, “advisers have a prime opportunity to educate their clients, show them the value of a broader, goals-based approach to investing, and build long-term trust that doesn’t fall apart when the market swings.
“Research shows that the interpersonal side of advice, which includes personalisation and behavioral coaching, can be the most valuable aspect of professional advice, and the industry needs to better articulate that.
“Changing investor perceptions won’t be easy, but it’s a challenge worth taking, both for investor success and the success of professional advisers.”
You can read the Morningstar report here:
The Value of Advice: What investors think, what advisers think, and how everyone can get on the same page
UK adviser? I’m going to be speaking at nine separate adviser events across the UK in March. There are still a limited number of places available if you would like to come along. You’ll find all the information here.