What’s the Value of Financial Advice?

by | Aug 6, 2019 | Financial Advisors, Growing Advisors Business, TRAK

Value of Financial Advice

Agreeing on the value of financial advice may seem easy given the wealth of information available on the internet. Yet the findings of a recent Morningstar survey reveal ample opportunities for advisors and investors to get on the same page.

In the survey, investors ranked a list of fifteen attributes according to what they valued most, and advisors ranked the list according to what they thought investors valued most. Surprisingly, only one value was ranked by both investors and advisors among the top three values: the ability of advisors to help clients reach financial goals.

Investors Advisors
What They Value Most What They Think Investors Value Most
1. Helps me reach my financial goals 1. Understands me and my unique needs
2. Has the relevant skills and knowledge 2. Helps me reach my financial goals
3. Communicates and explains financial concepts well 3. Keeps my interests in focus with unbiased advice

Beyond that initial consensus, there is a significant disconnect in the perceived importance of attributes among investors and advisors. The following three attributes had the greatest disparity between investors’ ranking and advisors’ ranking, and therefore indicate the greatest opportunities for advisors to position themselves to better educate and communicate with clients.

      • Can help me maximize my returns (ranked #4 by investors, #14 by advisors)
      • Helps me stay in control of my emotions (ranked #15 by investors, #11 by advisors)
      • Understands me and my unique needs (ranked #7 by investors, #1 by advisors)

Advisors mistakenly believed their understanding of clients’ unique needs would be their most valued attribute. Although Morningstar-cited research from the Journal of Financial Planning documents the link between personalization and healthier portfolios, investors are not connecting the dots. Therefore, advisors need to help investors understand that their needs, circumstances, and view of finances pave the way to better returns down the road.

While advisors hope that investors perceive value in their help controlling emotions, investors rank it as having the least importance. Advisors know that developing a long-term mentality helps investors weather the ups and downs of the market—and that when emotions enter financial decisions, carefully laid plans can be thrown aside, critically damaging portfolios. Preparing for various scenarios, understanding a client’s view of risk, and providing educational opportunities are great ways to help clients mitigate the consequences of emotion-driven decisions.

The values of investors and advisors may not align perfectly, but helping investors understand the value of financial advice is nevertheless a worthy pursuit. As research in behavioral finance continues to provide additional data for assessing this value, advisors can develop the interpersonal side of their services. Investors need advisors’ help in creating well-thought-out goals and navigating the journey to meet those goals.

Use TRAK to Build Your Financial Advice Value

The Retirement Analysis Kit (TRAK) developed by RetireReady Solutions® is a helpful tool for preparing individuals for retirement (including clients and 401(k) plan participants) while creating a complete retirement plan. Start a free trial today to see how TRAK can help grow your business.


Download a Free Trial of our TRAK Software Today!

Free Trial

Using Content Marketing as a Financial Advisor

Many advisors do not realize that their expertise can be an effective marketing tool for further engaging with clients and generating leads for new business. Content marketing strategies can be an effective way to grow your business through education. What is content marketing? When you think of...

Plan Advisors: Don’t Be a Commodity!

Advising plan sponsors and participants is a rewarding job but, in the changing qualified plan landscape, it can be increasingly difficult to win news plans. On one side, plan sponsors are feeling the heat from recent litigation focusing on fiduciary duties, fees, fund choices and other factors....

40 Open-Ended Questions to Engage Your Clients

Open-Ended Questions hold a special power of engagement which can help build rapport and trust between people. I think most people get this instinctively and, as we wrote recently, there are studies that reveal the unique strengths of asking questions.

Blame it on the Elections

Feel like your 2016 Q4 tanked? Feel like retirement planning is just not working like it used to with your clients (or plan participants)? You are not alone! Looking back at the last quarter of 2016, you may be wondering why you saw a decrease in client meetings, sales, and other business...

Five Ways to Improve Communication with Clients

Playwright George Bernard Shaw said that “the single biggest problem in communication is the illusion that it has taken place.” As a playwright, Shaw knew the importance of really communicating with the audience, making sure that the concepts, emotions, and thoughts you want to impart are what the...

Curse of Knowledge

Curse of Knowledge Three simple words can help us understand the problems many advisors face as they attempt to engage their clients toward retirement success: Curse of Knowledge.[1] Advisors know so much about their own world that they forget the context of those they seek their help and end up...

Tips for Matching a Paycheck in TRAK and TRAK-Online

TRAK’s Matching Paycheck Tool is available in both TRAK and TRAK-Online, this is a powerful calculator because when configured correctly you can match a client’s paystub, often down to the penny.