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What Are the Most Important Areas of a Financial Plan?

Clients rank investment results, fee transparency, access to quality investments, and more.

Michael M. Pompian, 09/15/2011

This article will review answers to behavioral questions asked to investors who use financial advisors in a survey I created last year. 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 nonfinancial elements of their relationships with their advisors. Last month we reviewed answers to the following question:

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

To see that article click here.

This month, we will review the survey question: What are the five 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 returned, 306 were completed by investors who use financial advisors. The information contained in the answers given by investors who use financial advisors 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. 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 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 that 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. 

We will now review the answers to a question about the most important aspects of a financial plan. The choices were: Investment Results, Transparency of Fees, Quality of the Advisor, Quality of the Systems/Reporting, Access to Quality Investments, Stability and Quality of the Firm, No Conflicts of Interest, and Research Capabilities of the Firm.

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