Financial advisers are working hard every day to secure the best possible outcomes for their customers. That might seem like an obvious statement, but it is also one that doesn’t get said enough.
As a provider of platform, software and investment management solutions to financial advisers, we’re acutely aware of this and spend a lot of time with advisers, paraplanners and administrators to build a service proposition that supports them in securing those great customer outcomes. Morningstar’s mission is to empower investor success, and we believe that great advice is key to that.
Demands are high
Great advice isn’t an easy thing to deliver. Quite aside from client-focused work and running a business, advisers must work hard to get qualified, top up their continuous professional development hours, and maintain the relevant technical knowledge, skills and expertise.
That’s hard enough, before we factor in staying on top of the ever-evolving policy, legislation and regulation landscape. Which, let’s face it, can be another full-time job.
The Retail Distribution Review (RDR) played a big part in shaking up the advice landscape, introducing changes to the way retail consumers received and paid for financial advice. And it set higher professional standards for advisers. Then last year, the FCA introduced new rules for the financial services sector under the Consumer Duty which puts even greater emphasis on protecting customers. That’s a good thing, but it also adds a lot more work to the average adviser’s in-tray.
Delivering fair value is now a major focus but too often that has become a conversation around the cost of advice, instead of the true value of advice, and that is an area where I think the industry needs to do more to support advisers.
The value of advice lies in trust
The best way to understand why investors work with advisers and what that means to them is to ask. As part of our commitment to continuous discovery, Morningstar Wealth spent around 600 hours last year speaking to advisers across a broad range of businesses. Morningstar has also carried out extensive consumer behavioural research which consistently shows that there is much more to choosing and continuing to work with an adviser than clients simply being happy with their investment returns.
Trust is the cornerstone of the relationship between a client and their adviser. It empowers clients to let them get on with the job in hand and also makes it much more likely that they will recommend their adviser to friends or family members.
When advice customers are asked whether they trust their adviser, 85% of respondents say that they do either completely or to a high level. The most trusted advisers are those who help customers to first understand and then make a plan to achieve their goals. The best advisers also consistently demonstrate that they care about their customers’ futures.
At the most practical level many clients turn to a financial adviser because they either don’t want or feel able to manage their own financial plans. They want to work with an expert who has the qualifications and market knowledge to help them, but who can also deliver the softer aspects of relationship management.
According to our research clients stick with their financial adviser because they take the pain away from dealing with financial issues, and because they can demonstrate the benefits of the advice they receive. The third factor is an appreciation that their adviser is helping them to make good decisions (while avoiding bad ones) through behavioural coaching. This can help to keep them on plan instead of making knee-jerk reactions.
Let’s hear more of the good-news advice stories
Being an adviser is a vocation. It’s a profession that advisers are quite rightly proud to be part of. And with good reason. Advisers work really hard to qualify, and to stay qualified and abreast of everything. But they also have numerous soft skills, some of which cannot be learned in a classroom.
Advisers do a lot to earn the trust of their clients. Yet there is still a great deal of mistrust associated with the advice profession. At times it seems as though there is a constant stream of criticism, and often from the segments of the industry who rely on advisers for their own success. Of course, it is important to call out bad practice where it exists, but it is more important to champion the vast majority of advisers who are getting it right and making a significant positive impact on their clients’ lives.
As we have seen in our research the value of advice is measured by far more than monetary terms. It’s the peace of mind for clients, the feeling that someone is in your corner and working for your best interests. Good advisers are worth much more than the fees they charge.
Over the past few months, I’ve been speaking with the team at Morningstar Wealth about this and how we can also be better advocates for advisers.
We recognise the many valuable ways advisers improve their clients’ lives and we think it’s important we champion that. Morningstar Wealth actively supports advisers through our research, investments and platform technology, but we know there’s more to do.
As an industry we need to work harder to demonstrate the impact that good advice has on investors’ financial and mental wellbeing.
Mark Sanderson is managing director of Morningstar Wealth
