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How Confident Are Your Clients in Your Plan?

Survey reveals the magnitude of confidence clients have in advisor-developed financial plans to help achieve financial goals.

Michael M. Pompian, 08/18/2011

For the next two articles, we will be reviewing answers to behavioral questions of investors using financial advisors from the survey I created last year that was completed by 980 individual investors who subscribe to either Morninstar.com and/or Morningstar investor newsletter publications. The questions cover behavioral aspects of how clients view nonfinancial elements of their relationships with their advisors. Last month we reviewed answers to the following question: How often you prefer regular communication from your advisor? (Click here to see that article.)

The survey questions/statements we will review during the next two months are the following:
1. How confident are you that the plan developed by your financial advisor will help you achieve your financial goals?
2. 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 that more than 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 because 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 call the investors who took the survey that use financial advisors "PEM-FA investors" going forward to stand for proactive, experienced, and male investors who use financial advisors.  

Confidence Levels
We will now review the answers to a question about how confident survey takers were in their financial plans developed by their financial advisor to help them achieve their financial goals. The four choices were: very confident, confident, somewhat confident, and not very confident. 

There are some interesting conclusions that can be drawn from the responses to these questions. I will offer my own observations and recommendations as it relates to creating and implementing plans with clients. Examining questions such as this is important because advisors should know how clients view nonfinancial aspects of their relationship with their advisor.

There are valuable insights into this subject from these responses. Below are the responses from the survey. 

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