• / Free eNewsletters & Magazine
  • / My Account
Home>Practice Management>Practice Builder>What Non-Financial Aspects Do Clients Value Most?

Related Content

  1. Videos
  2. Articles

What Non-Financial Aspects Do Clients Value Most?

A view into what traits investors value beyond investment services.

Michael M. Pompian, 04/21/2011

For the next six articles, we will be reviewing answers to behavioral questions posed to investors who use financial advisors from the survey I created in February 2010. The survey was completed by 980 individual investors who subscribe to either Morningstar.com and/or Morningstar investor newsletter publications. 

The questions cover behavioral aspects of how clients view the non-financial elements of their relationships with their advisors. The survey questions/statements we will review over the next six months are the following:

1. What non-financial aspects of the advisory relationships are important to you?

2. Rank by order of importance the characteristics you value in a financial advisor.

3. Select the top five aspects of a financial advisory relationship by order of importance to you.

4. Rank how often you prefer regular communication from your advisor.

5. How confident are you that the plan developed by your financial advisor will help you achieve your financial goals?

6. Check the three most important areas of a financial plan to you.

As you may recall from recent articles, the purpose of the survey was to gauge investing behavior and choices and how influential these choices are in the investment decision-making process. Of the 980 surveys that were completed, 306 were completed by investors that use financial advisors. The information contained in the answers given by these investors can be highly relevant to advisors in their quest to serve clients in the best way possible. 

It is important to remember that the Morningstar investor survey is composed of a very specific type of investor population, so let's review that now.

The population of survey takers in the Morningstar universe was generally defined as "mostly male, mostly experienced [experienced having a double meaning here--experienced in the sense that they are not new to investing and experienced in the sense that over half of the survey-takers were over 60 years old], and mostly do-it-yourself" investors. 

What this means is that the majority of survey takers were proactive, engaged, and self-directed investors, which, naturally, is only a subset of all investors. The populations of survey takers that use financial advisors are likely to be somewhat less self-directed, but we can assume since they subscribe to Morningstar services, they are still somewhat self-directed. 

It is important to remember not to extrapolate what is learned in this set of articles to the general population of investors because it contains many passive and/or unsophisticated investors as well as "middle of the road" investors who are somewhat engaged but don't have the time or aptitude for more. And of course, the general population of investors contains a higher percentage of women and young investors. For simplicity, I will call the survey respondents who use financial advisors "PEM-FA investors" going forward to stand for Proactive, Experienced and Male investors who use financial advisors.  

We will now review the answers to four questions related to how PEM-FA view their relationship with their financial advisors. Respondents were asked if they Strongly Agree, Agree, Somewhat Agree, or Don't Agree to the following four statements:

1. I look at my advisor as a partner rather than simply as a service provider.

2. I rely on my advisor to understand my total financial needs (not just investments).

3. I rely on my advisor to understand my family dynamics as they relate to my money.

4. I primarily rely on my advisor to provide me with the information I need to make my own investing choices.

These questions are important because they examine how investors look at the non-financial aspects of their relationship with their advisors, and there are valuable insights into this subject from these responses. 

 Question 1
 

Strongly
Agree

Agree
Somewhat
Agree
Don't Agree
I look at my advisor as a partner rather than simply as a service provider.

24.7% (73)

37.6% (111)

22.7% (67)

14.9% (44)

 
Commentary
: As you can see, over half of the respondents either agree or strongly agree with this statement.  Advisors should approach relationships with their clients as a partner in attaining financial goals.  But most of you knew that anyway, right!? This is crucial to a successful advisor-client relationship.

 Question 2
 

Strongly
Agree

Agree
Somewhat
Agree
Don't Agree
I rely on my advisor to understand my total financial needs (not just investments).

17.5% (51)

29.1% (85)

31.2% (91)

22.3% (65)

 
Commentary
:  Here, we can see that less than 50% either agreed or strongly agreed with this statement. The most frequent response was "somewhat agree."  The way I read this, investors think that having an advisor understand their total financial needs is important, but not nearly as important as being skilled with investments. This is also crucial information for advisors when working with clients toward a successful relationship.

 Question 3
 

Strongly
Agree

Agree
Somewhat
Agree
Don't Agree
I rely on my advisor to understand my family dynamics as they relate to my money.

14.6% (43)

29.8% (88)

27.8% (82)

27.8% (82)

 
Commentary
:  Similar to the last question, less that 50% either agreed or strongly agreed with this statement.  Nearly 30% agreed while over 25% disagreed; clearly there is not a uniform preference across the base of respondents as to whether they want their advisor to understand family dynamics. However, with 30% agreeing, it is safe to say that some clients want their advisors to understand their family dynamics. Therefore it is important that advisors ascertain, hopefully at the beginning of the relationship, where their clients preferences are on this subject.

 Question 4
 

Strongly
Agree

Agree
Somewhat
Agree
Don't Agree
I primarily rely on my advisor to provide me with the information I need to make my own investing choices.


14.9% (44)


34.2 (101)


34.6% (102)


16.3% (48)

 
Commentary
:  While nearly 35% only somewhat agreed with this statement, almost half of respondents agreed or strongly agreed with the statement. On balance I would say this is a high number; I would have expected to see more investors relying on their advisors for more than just information to make their own investing choices. However, one needs to keep in mind that the population of survey takers is PEM-FAs, meaning they make a lot of their own investing decisions.

Hopefully you have learned something about how PEM-FA view non-financial aspects of their relationship with their advisors.  In next month's article, we will be reviewing how PEM-FA investors answered behavioral questions related to the characteristics they value in a financial advisory relationship. 

Michael M. Pompian, CFA, CFP, is an investment consultant to ultra-affluent clients and family offices and is based in St. Louis. His book, Behavioral Finance and Wealth Management, is helping thousands of financial advisors globally build better relationships with their clients.

blog comments powered by Disqus
Upcoming Events
Conferences
Webinars

©2014 Morningstar Advisor. All right reserved.