What Investors Told Us They Want From Advisors

Earlier this year, Morningstar conducted its Voice of the Investor survey, which interviewed 4,645 investors and noninvestors from the United States, United Kingdom, and Australia. An additional study surveyed 506 investors who work with a financial advisor to gain insights into advisor fees. (Information on both studies can be found here.)

I want to explore responses from two specific groups that might be most relevant to advisors: wealthy investors (those who have at least $500,000 in investable assets) and young investors. Advisors typically serving well-off clients need to also attract younger investors to grow their practice and survive long term. The characteristics and needs of these two distinct investor groups must be truly understood by advisors to position themselves as sought-after partners while delivering exceptional value.

Serving Wealthy Investors

Wealthy investors require high-quality, proactive advice. In reviewing the responses from these investors in Morningstar’s studies, the following key insights were apparent.

Personalized, Tax-Savvy Strategies

Wealthy investors value advisors who can minimize their tax liabilities and provide individualized financial plans. According to the fees study, wealthy clients are willing to pay professional fees to advisors with expertise in complex financial and tax matters who can develop strategies that align with their specific circumstances.

Complex Financial Situations

Wealthy investors often require advice in the areas of estate planning, risk management, and long-term tax strategies. These investors need counsel in determining how best to allocate their assets between themselves, future generations, and charity or Uncle Sam. They also need personalized planning to integrate portfolio assets along with their other investments such as real estate and private equity. More than two thirds of wealthy investors in the survey use the services of an advisor; fewer than one fourth of investors with smaller portfolios (under $100,000) use an advisor. It’s not just a question of who can afford to pay for advice; those with larger portfolios have more complex financial situations (per the survey) and, thus, have a greater need for expert advice.

Proactive Advice

Wealthy investors are willing to pay for—and expect—proactive advice. They want their advisors to identify opportunities, address potential risks, discuss market trends, anticipate tax law changes, and provide timely advice. It might sound like a lot, but a wealthy client is paying higher fees than other clients. They expect premium service for that.

Recommendations for Advisors Working With Wealthy Clients

To attract and retain wealthy clients, advisors need to up their game. This means expanding expertise, communicating proactively, building trust, and leveraging technology.

Expand Expertise

If you want wealthy clients, you need to expand your expertise in areas relevant to them, such as estate planning, tax planning, risk management, and retirement strategies. This typically requires ongoing education in excess of the minimums required. Be sure to look for content-rich conferences, seminars, and webinars, including:

Many other conferences are worth considering, based on your particular needs, including the eMoney Summit, NAEPC Advanced Estate Planning Strategies Conference, XYPN Live, InvestmentNews Retirement Income Summit, Future Proof, and Bob Veres’ Insider’s Forum.

Communicate Proactively

Maintain regular communication with wealthy clients, proactively addressing their concerns and providing updates on market conditions and investment performance. This demonstrates a commitment to their financial well-being and helps build trust.

Build Trust

Building trust is crucial to retaining wealthy clients. It is about more than appearances or “touching base” emails. To foster trust, you must demonstrate a solid familiarity and understanding of clients’ unique financial situations. Take time to actively listen to your clients’ concerns, ask thoughtful questions, and respond with individualized recommendations.

Leverage Technology

To carve out time for deeper and more personalized client relationships, advisors need to embrace technology and consider outsourcing. Look to automate back-office tasks that are repetitive, time-consuming, and at risk for errors. Such technology can include trading and rebalancing software, billing programs, portfolio accounting systems, digital account access, and online communication platforms.

Serving Young Investors

Attracting young investors is critical to the long-term survival of an advisory firm. To do so, advisors must understand that young investors have quite different priorities and needs than older, more financially affluent investors, including education, targeted planning services, and environmental, social, and governance investing.

Education

Young investors often seek guidance and education on financial topics relevant to them. For example, more than one third of millennials and Gen Zers invest, to some degree, in crypto assets. Even if an advisor does not encourage these investments, it’s important to be able to speak from a point of knowledge. According to Morningstar’s advisor fee study, younger investors are more likely to value advisors who provide educational resources and support. This indicates a desire for advisors who can help them develop a strong financial foundation and make informed decisions.

Targeted Planning Services

Despite short-term challenges like student debt, young investors have a long investment horizon and prioritize building wealth for the future. Unlike older, wealthier investors, young investors need help with reducing student debt, budgeting, establishing a cash safety net, saving for a home, and setting annual savings goals.

ESG Investing

According to the Morningstar survey, young investors are somewhat more inclined to seek investment opportunities that align with their values. Interestingly, the preference difference between young investors and wealthy investors is not huge. About two thirds of young investors want investments that positively consider their personal values and avoid investing in certain industries (like weapons or tobacco) versus about one half of wealthy investors.

Recommendations for Advisors Working With Young Investors

Provide Financial Education

Offer resources and workshops to help young investors develop a strong financial foundation. It is important for advisors to supplement their education on subjects that don’t typically apply to their high-net-worth clients, such as budgeting, debt management, and alternative investing.

Offer Tailored Services

To appeal to and retain younger clients, advisors need to create personalized investment plans that align with their long-term goals and individualized needs. This requires a deep understanding of their individual circumstances and financial aspirations. For example, create a plan to help your younger clients save for a home; set targets for reasonable annual retirement savings, rather than a specific retirement timeline; or help them analyze various investment options they might encounter. By providing targeted services, advisors have a unique opportunity to establish long-term relationships with young investors.

Emphasize ESG Investing

Advisors who want to resonate with younger investors (and wealthy clients for that matter) should incorporate sustainable and impact investing options into their offerings. This can include investments in companies that prioritize ESG factors or funds that avoid investing in certain industries that are non-socially desirable.

Up Your Technology Game

Use digital tools to engage with young investors, such as online platforms and social media. This can help you reach a wider audience and provide convenient access to information and services.