Investor or investment management: Which do clients value most?

morningstar client relationships financial advisers

27 May 2024
| By Laura Dew |
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The role of a financial adviser is becoming more about investor management than investment management, according to Morningstar, with a greater emphasis placed by clients on an adviser’s soft skills.

Speaking at the Morningstar annual investment conference in Sydney, Ryan Murphy, head of behavourial insights at Morningstar, discussed what clients value when seeking advice.

Delegates at the conference were asked to select from a list of reasons why they believed clients hired a financial adviser and the audience overwhelming selected “quality of relationship with adviser”. 

However, Morningstar’s research found the joint top reasons were client discomfort with their own finances and specific financial needs. This was followed by behavioural coaching, recommendations and the quality of relationship in fifth place. 

“It is notable that four out of the five categories that people seek an adviser are emotional reasons,” Murphy observed.

“Soft skills are some of the most valuable in the advice process but it’s more than just intuition. We can use hard science to better understand investors and how best to engage with them. The value of an adviser is evolving and the job is becoming less and less about investment management and more about investor management, so anything you can do to enhance your skills in that area will be useful.”

Referencing clients’ discomfort with their own finances, he said a lot of advisers’ responsibilities is “helping people not do dumb things” as well as the active investment decisions and portfolio construction. 

“This is not necessarily something that people recognise the value in, but in times of market volatility, it’s about helping people not to do dumb things. You might have a client who asks what they should do if there is a recession; it’s not if but ‘when’ there is a recession if they are investing for a 30-year time period. Helping to reframe that, explaining about market cycles and not overreacting is really good advice to keep people on track. It’s not something that clients will ask you to do, but it helps them in the long run.”

Writing a relevant client value proposition

Now that advisers are aware of what their clients value, it is important to write a value proposition in a way to reference those three factors that clients value: client discomfort with their own finances, behavioural coaching and specific financial needs.

“If there is one word to take away from this, then it is ‘goals’. This is a recurring theme we see over and over again in our research. Recast the process of financial planning as a ‘goal-seeking opportunity’ and it can help people make better financial decisions,” Murphy said.

“Being an investor is not natural; it requires dedication, patience and delayed gratification. Our neural pathways are designed not to do that. But people want to reach these goals, so they are willing to do that, and that’s what advisers need to emphasise.”

He recommended when advisers are writing a value proposition:

  • Mention goals and helping them to make better decisions.
  • Mention education and guidance to help clients stay on track. 
  • Mention navigating financial decisions.
  • Framing the proposition with the client at the centre.
  • Identify how you can help the client.
  • Keep it simple, easy and relevant, rather than use financial jargon.
  • Seek an opinion from someone outside the industry.
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