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Client Engagement

3 Ways to Prove Your Value as a Financial Advisor

Financial advisor value is evolving—are your clients up to speed on what it can entail?

By Samantha Lamas

The graphic shows some of the top challenges for financial advisors.

Read Time: 4 Minutes

Advisors face many obstacles, but when we asked them what their biggest challenge was, we quickly found that many related to one overarching theme: financial advisor value.

The graphic above shows that some of the top challenges for advisors include: showing their value compared with robo-advisors and peer advisors, improving their value by using the most efficient software, prioritizing their time well, and meeting their clients’ ever-shifting preferences. All these various challenges come back to the core principle of value and, specifically, demonstrating that value to clients.

One reason advisors struggle to communicate this value could be the discrepancies between what investors actually value and what financial advisors think investors value. In our research, we found that these two groups’ perspectives don’t always align.

Here, we discuss what contributes to this gap and how advisors can help bridge it.

What We Can Learn from the Gaps

For this research, we asked individual investors to rank a set of common advisor attributes—such as “Helps me reach my financial goals” and “Understands me and my unique needs”—in order of importance. We also gave the list to advisors and asked them to rank the attributes in the order they thought investors found most valuable.

When we compared the average rankings of advisors and investors, there were quite a few crucial disagreements. However, many of them can be mitigated through proper communication.

How to Help Clients Understand True Financial Advisor Value

Because of these discrepancies, it’s important for investors and advisors to effectively communicate and ensure that they’re on the same page about the client’s goals.

Here are three key topics advisors should broach with clients to help communicate their unique perspective and value.

1. Demonstrate the importance of personalized goals-based planning. Implementing a goals-based strategy can increase a client’s wealth by more than 15%. This may come as no surprise to financial professionals, given the known benefits of personalized advice, but individual investors may have a different perspective.

Our research found that although financial advisors think that personalization is very important for their clients, individual investors ranked it much lower on their list. Given the effectiveness of personalized advice, advisors should not take for granted that investors are committed to a goals-based strategy. Rather, they can provide a high-level overview of a goals-based strategy’s effectiveness to help investors understand the impact it can have on their overall wealth.

2. Introduce clients to the world of behavioral coaching. The modern advisor is now also a behavioral coach: Someone who helps their clients weather market volatility and stay on track with their financial plan. This service is both unique to in-person advisors and extremely effective at improving their clients’ performance. But unfortunately, it’s another attribute investors take for granted—in fact, they ranked it as the least valuable attribute. To help more investors understand the value of behavioral coaching, advisors can start introducing clients to the field of behavioral science.

You can get started with the resources and exercises we created for advisors to use with clients and display the importance of behavioral finance in investing.

3. De-emphasize maximizing returns. The role of an advisor has evolved substantially since the time when investors only went to advisors for stock tips or investment strategies. Some clients, though, may be stuck in the past.

In our research, investors continued to rank “Helps me maximize returns” high on their list. To help clear up this misconception and demonstrate deeper value, advisors can provide examples where chasing returns can hurt an investor’s progress toward their goals. For example, a client that is three years from retirement should focus on maintaining their wealth, not taking on risk to increase return.

Showing the Breadth of Financial Advisor Value

Our research points to one overall finding: Financial advisor value is currently misunderstood. The role of an advisor is no longer just to be an investment expert; it’s also to serve as a behavioral coach, financial counselor, budgeting master, and more.

Advisors wear many hats, and the evidence suggests that investors are having trouble recognizing all the ways an advisor can help them with their finances. Having these conversations with clients may help.

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Direct Indexing is a values-based investment experience that delivers Morningstar research and technology to advisors seeking greater choice and flexibility for their clients and their practice. The result is a tax-efficient, highly-customizable-portfolio and a seamless end-to-end experience that offers advisors the ability to shape client investments based on unique individual preferences and long-term goals.