What do clients value most from financial advice? The reflexive answer among many financial professionals might be investment returns. But it’s most often the intangible benefits that people value most. And there is mounting evidence to prove it.
Each year, we conduct a global survey* of thousands of investors who are served by firms we work with. These surveys look not only at why people seek out advice but also what keeps them with the advisers they eventually choose.
The 2021 survey found the top five attributes clients valued in their advisers were:
• their understanding of the clients’ financial goals
• their skill in communicating financial concepts in way the clients understand
• their responsiveness to requests for help
• their ability to instill a sense of security and
• their personalised service.
This shouldn’t really be a surprise. It makes intuitive sense that what people value most from advice is peace of mind about their financial affairs. And that in turn requires a client-centric approach built around individual need, not product.
In my years of working with best practice advice firms, I have found that great advice starts and ends with the client’s needs. It is not primarily about financial strategies, approved product lists, or key performance indicators. It is always about the client.
A few years ago, the Hayne Royal Commission revealed the consequences of moving away from a client-centric approach. The risk was that advisers, however well intentioned, might end up trying to fit clients to products instead of vice versa.
For advice to be effective, the starting point must be the clients, their family, work and financial circumstances, their immediate needs, their long-term goals, and their risk appetites. Great advisers listen and learn. They establish need before offering solutions.
The value proposition is in knowing each client as an individual. But it also comes from each adviser’s knowledge and experience. Where have they seen challenges like this before? What worked? What didn’t? What is the problem exactly? So often, it can come down to showing the client how to look at a challenge differently.
None of this need have anything to do with financial products. These have a role to play, of course, but they are not solutions in themselves. They are merely tools which advisers can use to solve people’s problems.
Ultimately, this is the difference between a fiduciary and a facilitator. The latter is there for the sale, often telling clients what they want to hear instead of what they need to know. By contrast, fiduciaries act with a view to the client’s best long-term interests.
You can tell fiduciaries by the questions they ask. These are not just about money but about what the clients value in their lives, about what they hope and fear most. The questions are as much about qualitative as quantitative issues.
Ultimately, the adviser’s role is to provide clients with a sense of structure so they can chart a course to their desired destinations. By setting expectations up front, advisers can help clients stay disciplined so that they have a much better investment experience.
The experience of the last three years offers an illustration. Despite a global pandemic, the re-emergence of high inflation everywhere, and the outbreak of the worst land war in Europe since the 1940s, equity markets have delivered a positive return.
The value of someone keeping the client grounded, non-reactive and focused on their long-term goals in such a difficult and uncertain environment is invaluable. Once perspective is regained, the conversation can then return to those factors within the client’s control.
When advice firms embrace this approach, it has been proven time and time again that they can thrive.. Their clients are happy, their businesses are successful and, freed of conflicts, they can focus on adding real value to people’s lives. Demonstrating that value is how businesses thrive.
This framework upends the old model. Instead of a large financial institution at the top, incentivising a sales force to distribute product, the client sits at the peak. The adviser works for the client and seeks out the best solutions to fit the client’s needs.
It is within this structure that advice comes into its own, offering the intangible and universal benefits that are also the most prized among people of all ages, means, occupations and interests.
For advice firms, it is also offers a robust and sustainable business model.
Paul Turner Heads the Adviser Group at Dimensional Australia, a global asset management firm which has been working with financial advisors for more than three decades in helping people reach their goals. Find out more about how Dimensional can help you articulate the intangibles of your advice to clients here
*Dimensional’s 2021 Global Investor Study provides advisors with greater insight into how clients perceive their firms. Over a two-month period, clients collectively submitted more than 14,000 survey responses; by gathering direct, anonymous feedback from their clients, advisors gain a better perspective on what clients value in an advisory relationship, their financial needs and concerns, and ideas on how to engage with their ideal target client.
Participating firms were provided with six required questions, along with the ability to select up to nine additional questions to ask their clients including two open-ended response questions. Firms then delivered the survey link directly to their clients. The survey was entirely anonymous and no personally identifiable information was shared with the firm or Dimensional.
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