3 key conversations to prove your financial adviser value to clients

By Samantha Lamas

Advisers face many obstacles, but when we asked them what their biggest challenge was, we quickly found that many related to one overarching theme: financial adviser value.

The graphic above shows that some of the top challenges for advisers include: showing their value compared with robo-advisers and peer advisers, improving their value by using the most efficient software, prioritising their time well, and meeting their clients’ ever-shifting preferences. All these various challenges come back to the core principle of value and, specifically, demonstrating that value to clients.

One reason advisers struggle to communicate this value could be the discrepancies between what investors actually value and what financial advisers think investors value. In our research, we found that these two groups’ perspectives don’t always align.

Here, we discuss what contributes to this gap and how advisers can help bridge it.

What we can learn from the gaps

For this research, we asked individual investors to rank a set of common advisor attributes—such as “Helps me reach my financial goals” and “Understands me and my unique needs”—in order of importance. We also gave the list to advisers and asked them to rank the attributes in the order they thought investors found most valuable.

When we compared the average rankings of both groups, there were quite a few crucial disagreements. However, many of them can be mitigated through proper communication.

How to help clients understand true financial advisor value

Because of these discrepancies, it’s important for investors and advisers to effectively communicate and ensure that they’re on the same page about the client’s goals.

Here are three key topics advisers should broach with clients to help communicate their unique perspective and value.

Step 1: Demonstrate the importance of personalised goals-based planning. Implementing a goals-based strategy can increase a client’s wealth by more than 15%. This may come as no surprise to financial professionals, given the known benefits of personalised advice, but individual investors may have a different perspective. Our research found that although financial advisors think that personalisation is very important for their clients, individual investors ranked it much lower on their list. Given the effectiveness of personalized advice, advisers should not take for granted that investors are committed to a goals-based strategy. Rather, they can provide a high-level overview of a goals-based strategy’s effectiveness to help investors understand the impact it can have on their overall wealth.

Step 2: Introduce clients to the world of behavioural coaching. The modern adviser is now also a behavioural coach: Someone who helps their clients weather market volatility and stay on track with their financial plan. This service is both unique to in-person advisors and extremely effective at improving their clients’ performance. But unfortunately, it’s another attribute investors take for granted—in fact, they ranked it as the least valuable attribute. To help more investors understand the value of behavioural coaching, advisers can start introducing clients to the field of behavioural science. You can get started with the resources and exercises we created for advisors to use with clients and display the importance of behavioural finance in investing.

Step 3: De-emphasise maximising returns. The role of an adviser has evolved substantially since the time when investors only went to advisors for stock tips or investment strategies. Some clients, though, may be stuck in the past. In our research, investors continued to rank “Helps me maximise returns” high on their list. To help clear up this misconception and demonstrate deeper value, advisers can provide examples where chasing returns can hurt an investor’s progress toward their goals. For example, a client that is three years from retirement should focus on maintaining their wealth, not taking on risk to increase return.


Showing the breadth of financial adviser value

Our research points to one overall finding: Financial adviser value is currently misunderstood. The role of an adviser is no longer just to be an investment expert; it’s also to serve as a behavioural coach, financial counsellor, budgeting master, and more.

Advisers wear many hats, and the evidence suggests that investors are having trouble recognising all the ways an adviser can help them with their finances. Having these conversations with clients may help.

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

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