A recent study by Morningstar reveals significant gaps between what advisors think are the top attributes or skills they bring to the relationship and what their clients value most. While both advisors and investors rank “Helps me achieve my financial goals” at or near the top of what investors value, results diverge from there. The attributes that represent the three widest gaps are:
1. “Can help me maximize my returns”
Achieving significant investment returns is close to the top of the list of what clients expect from advisors. Advisors, on the other hand, put it close to the bottom. This is likely due in large part to the industry’s emphasis in the past on performance as a selling point. It could also be because most advisors consider themselves holistic wealth advisors, where investments are only part of what they deliver.
The message is clear: advisors may need to remind their clients that reaching their financial goals, rather than beating the benchmark, is what it’s all about.
2. “Helps me stay in control of my emotions”
Investors put this at the bottom of the list. Yet, advisors think it adds value, and a 2014 Vanguard study shows that by acting as a behavioral coach to guide investors through market volatility, an advisor can add, on average, 150 basis points to a client’s return over a five-year period. Helping investors understand the importance of this attribute can go a long way toward reinforcing the tangible value an advisor can bring to the table.
3. “Understands me and my unique needs”
Advisors think they perform no higher value than really understanding their clients. They put this attribute at the very top of the list. Investors, on the other hand, rank it somewhere in the middle in terms of value. This could again be because investors are focused on investment advice and returns/performance metrics, or because, while advisors often emphasize personalization, they haven’t successfully delivered. This could be costing investors, however, as research (David Blanchett “The Value of Goals-Based Financial Planning”), again, indicates personalization in the form of goals-based investing can result in significantly greater accumulation of assets.
Source: The Value of Advice, © Copyright 2019 Morningstar, Inc.