In 2017 Dimensional Fund Advisors conducted a survey amongst the clients of financial advisers who work with the firm. The study reached just under 19 000 people.
One of the key questions that Dimensional asked was: 'How do you primarily measure the value received from your adviser?”
By some margin the top response was: “sense of security/peace of mind”.
What this most obviously highlights is how clients do not measure their experience purely on the value of their portfolios. “Investment returns” was only fourth on the list.
This won't surprise astute financial advisers. Those who represent the best of the profession are well aware that the intangible aspects of the relationship are what clients appreciate the most.
It is not about picking funds or generating top-performance, and it certainly isn't talking about the markets. Clients most value someone who understands their goals and can keep them updated on the progress they are making towards reaching them.
Put another way, it's about answering the questions that the clients most worry about. Very few people lie awake at night fretting over whether they are taking too much duration risk in their fixed income exposure, or whether they should be tilting their equity portfolios more towards growth or value stocks.
What concerns the majority of clients are things like whether they can afford another baby, if they have saved enough to put their children through university, or how much they will be able to travel when they retire.
Those are the questions they really need someone to help them answer. They are likely to be much less interested in issues like whether the gold price rally is going to be sustained.
This raises two important questions for advisers. These are valid even for those who understand how important this is.
The first is whether the conversations they are having with their clients are identifying these priorities. Simply asking a client what they want is unlikely to be enough on its own to get there.
To appreciate what someone really wants from their money, an adviser has to be truly curious about them. Where are they currently in their lives? How did they get there? What are the challenges that they are currently facing? What would be a good outcome in addressing them?
This requires being able to listen and empathise with a client, but even more importantly creating an environment in which they feel safe enough to open up. It is difficult for most people to speak about their fears and concerns, and even more so when those are linked to money. That means that clients are extremely vulnerable when they come to an adviser, and that needs to be treated with great care and respect.
The second question is what an adviser does with this information. As this is a relationship that is set up with the expectation that the adviser is the expert, the temptation is to get to the solutions as quickly as possible.
However, the best way to really find out what your client values is always going to be to ask them.
“Where do you think I can add value?” is therefore one of the most powerful questions that an adviser can ask.
This will almost always lead to a much deeper discussion, well beyond anything transactional. It not only helps to clarify expectations, but also to get the client engaged in the planning process from the start.
Picture: Micheile Henderson via Unsplash
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