Investors Want More Than Financial Advice From Advisors

When it comes to financial advising, are investors paying advisors for their expertise?

This is a trick question. That’s because the answer isn’t “Yes”—it’s “Yes, and…” Investors seek financial advisors for their expertise and their ability to provide peace of mind, understand and address their spoken and unspoken needs, provide a guilt-free way of crossing things off their to-do list, and so much more.

The “and” is essential for advisors to understand, and points to an evolution in the financial advice industry.

Michael Kitces discussed this development during a session at the Morningstar Investment Conference: The financial advice industry started with a focus on selling products, and it was more recently that they started providing advice, given their extensive expertise.

Now, with the advances in artificial intelligence technology, some may argue that even expertise has been commoditized (to some extent, though I think this is still a bit of a stretch).

So, the question remains, what do investors pay advisors for? If it’s not just for expertise, what else is there?

Answering these questions may help advisors better understand what investors value and open the door to new ways to differentiate your services.

Don’t Just Offer Advice, But Advice Investors Can Rely On

In our research, we identified key themes that reflect what investors are looking for in their advisors. One theme that we found strong support for: Investors are looking for an advisor to provide advice they can rely on.

Though on the surface, this theme may seem to speak to an advisor’s expertise (having the relevant skills and knowledge to complete financial tasks), it was more layered than that. Rather, expertise was simply the foundation—and more aspects of the theme were more multifaceted.

Broadly speaking, the theme of “advice I can rely on” reflected an advisor’s ability to provide personalized recommendations, address a client’s unique financial needs, and alleviate a client’s financial concerns and worries. These activities do require extensive financial knowledge, but they also require a deep understanding of the client, both their financial needs and how they emotionally manage financial matters.

To develop a relationship where a client feels like they aren’t only getting advice from you but advice they can rely on, it’s important for advisors to build a personal and trust-based connection.

Based on our research, here are two ways advisors can achieve this connection:

• Ensure your client understands your adherence to the best-interest standard. It’s not enough that you have the word “fiduciary” on your website. The truth is that many clients don’t understand how their advisor gets paid, and that can be an issue if left unexplained. Clients need to understand the relationship between the advice they are getting and how you get paid to see how your advice is something they can rely on for their needs.
• Try working with your client to build a financial plan, rather than just giving them a plan and sending them on their way. Much of what an advisor does can seem like rocket science to clients, so let investors into your decision-making process. This may help them see themselves in your work. In practice, this process can look like a “flipped” classroom setting, which involves sending information to clients in advance. This allows them to come to a meeting fully prepared to engage in discussion.

Wrapping Up

Nowadays, financial advising isn’t just about knowing the right answers. Given the capabilities of technology, investors are demanding more than “just advice” from their advisors.

To move toward giving clients advice they can rely on, advisors should focus their efforts on building a trusting and personal connection with their clients.