Advisers who want to add value to their clients need to look beyond market returns to give their clients an overall quality experience, according to Vanguard’s Global Investment Strategy group principal, Francis Kinniry.
According to Kinniry, this added value, which he calls ‘adviser’s alpha’, is demonstrated by the adviser’s ability to act as a wealth manager, financial planner and behavioural coach, providing discipline and reason to clients who are often undisciplined and emotional.
He said that valuing advisers based on their ability to achieve market returns places advisers at a disadvantage, which is especially true with the opt-in reform looming over the industry.
“Not only does success depend on factors outside of the adviser’s control, it can also promote a ‘horse race’ mentality among clients, leading them to depart if the promised outperformance does not materialise.”
Kinniry said that as the financial services industry shifts from a commission-based structure to a fee-based asset management framework, demonstrating value to clients would become even more important.
“However, providing a well-considered investment strategy and asset allocation is as important as an adviser’s investment acumen and ability to deliver better returns than the market,” he said.
