I took the opportunity this week to grab a coffee and have a good read of an excellent piece of research that was issued by PortfolioMetrix at the start of the summer. The research is called “The insider’s guide to the value of advice” and can be accessed here. It’s well worth a read, as it considers the views of almost 200 financial advisers in Ireland, UK and South Africa in relation to this important subject. It also overlays the research with further good insights from both advisers and from PortfolioMetrix, along with links to other relevant research and articles.
So what are the nuggets that the research tells us?
First of all, it was useful to see on one page the financial value of advice as identified by other research carried out by a number of large, international organisations such as Vanguard, Russell Investment and others. This external research reveals,
- Advisers add between 3%p.a. to 4.4% p.a. in net returns for their clients.
- Clients who enjoy an ongoing relationship with a financial adviser had pension wealth that is 50% greater than those who only got once-off advice.
- The savings of an advised client will be 2.73 times greater over a 15 year period versus a non-advised client.
The PortfolioMetrix research asked the advisers to pick, and then rank, their top five attributes from a suggested list of twenty. As it turned out, only seven of the 25 attributes were selected by more than 25% of the respondents. Interestingly, there was one standout attribute that was selected by 76% of the respondents; Empathy. This is the ability to put yourself in the client’s shoes and really understand what is important to them. It is about gaining their confidence and building trust. As one respondent added in their commentary,
“Without empathy no amount of professional qualifications is going to help you engage with clients”
The next six attributes that were also chosen by more than 25% of the advisers were;
- Life Goals (49%)
- Peace of mind (47%)
- Simplify (47%)
- Personalised financial plan (41%)
- Consistency & continuity (39%)
- Behavioural coaching (36%)
Each of the 20 attributes were also identified as belonging to one of four categories which revealed that,
- Soft skills are most important (35% of advisers)
- Building the financial plan (30%) is next
- Putting the plan into action (20%)
- Ongoing service (15%)
The conclusions of the report cautioned though that It is also worth noting that what advisers think is valuable to their clients is not always matched by what their clients think. A study by Morningstar revealed a sizable disconnect between the views of advisers and their clients. Clients undervalued behavioural coaching whilst advisers overvalued understanding the client’s unique needs and undervalued maximising returns. The takeaway from this is that once you have articulated your own value proposition, it is worth running it past your clients to ensure it resonates with them.
This is a current and valuable piece of research that is worth reading by all advisers.