How Investors Define the Value of a Financial Advisor

How the Financial Advisor Proposition Is Changing

Today's investors know they have a wide range of financial options available to them, including lower-fees for self-directed investing, robo-advisors and the proliferation of low-cost index funds and ETFs. This being said, although investors are generally more educated on financial matters than in the past, they still want the advice and guidance of an expert. Because of the self-directed options, clients now want more of a relationship with their advisor, focused on a holistic approach that helps them achieve their financial goals.

1. Clients value a financial advisor that helps them achieve their financial goals

As investors become more sophisticated, they are increasingly looking for financial advisors who can help them not only make money, but also achieve their financial goals. A good financial advisor will take the time to understand a client's unique set of circumstances and goals, and then develop a plan that balances short-term needs with long-term objectives.

As goals change over time, it is important for financial advisors to keep communication channels open with their clients, and remember that goals get more complicated as clients age, and their financial situation changes. This way, advisors can ensure that their client's goals are being met, and can make any necessary adjustments to the plan. Good communication is also key to maintaining trust between advisor and client.

Advisor Takeaway:

• Focus your marketing and acquisition tactics around the most common goals you see within your client base, as they're likely similar for prospects
• Make goal exploration a key focus of your initial conversation with clients.
• Ask open-ended questions that allow the client to articulate their short and long-term goals — make sure to check in on both progress and shifting goals periodically. Good open-ended questions cannot be answered with a simple “yes or no” and could include questions like “what are your biggest concerns around long term investments strategies,” or “what financial questions motivated you to get in contact with me?”

2. Clients value the expertise, trust, and reputation when looking for an advisor

As clients become more educated, they are looking for financial advisors who can provide them with more than just investment advice. Clients want to work with someone they can trust to help them achieve their financial goals. One of the most important things clients look for in a financial advisor is expertise, as they want to be assured that their portfolio is in the hands of a credible, credentialed expert.

Clients are also becoming more comfortable doing extensive research and vetting on their financial professional by using online resources. For this reason, advisors must make sure that their sales and marketing collateral effectively communicates their expertise, and that their presence online, offline, and in company culture supports this. 

Another way to build trust with clients is by staying up-to-date on industry trends and changes. This shows that you are invested in your career and are committed to providing the best possible service to your clients. One way to do this is by investing in continued education, re-certification, and other tactics to help you and your team stay relevant.

Advisor Takeaway:

• Advisors should stay on top of regulations that might impact a client's investments and or overall financial situation
• Advisors need to monitor their online reputation and invest in marketing, PR and other channels to improve their digital experience.

3. Clients want clear, consistent communication and the ability to explain complex financial concepts

As an advisor, keep in mind that your clients don't focus on financial and investment strategies every minute of every day. Because of this, it is important for an advisor to succinctly distill complex financial topics in a way that makes sense to their clients. Remember to be genuine and empathetic in your approach, avoiding jargon that makes it seem like you're exploiting the information gap. Using simple everyday language that aligns with your client's knowledge level can help to effectively convey ideas. Visit LPL's Financial Dictionary to learn more.

Research also shows that people tend to make important decisions based on emotion. While advisors should understand what goals their clients have, it is also important to understand the why behind those goals in order to give well-informed advice. 

Advisor takeaways:

• Develop a go-to list of helpful analogies to explain the more common, complex financial situations that clients encounter. For example, instead of trying to describe losses in the stock market based on complex projection graphics, try saying “when the stock market rises it’s like blowing up a balloon, when it falls it’s like letting all the air out.”
• Structure discovery calls around the "why" that drive clients financial goals. For example, “why are you looking into sustainable investing?” or, “why do you think your business plan could be improved?”
• Be diligent about periodic check-ins with clients — not only focusing on performance, but understanding what changes may be taking place in their lives.

4. Clients want a financial advisor that can help maximize their returns

Finally, it's crucial to remember, while a holistic approach to wealth management is important, most clients ultimately measure success by their returns. In times of volatility, it's important for advisors to lean into the advice part of the job to ensure that the client's behavioral bias doesn't result in knee-jerk decision making. Clients may have general ideas of how to benchmark performance (for example, to 'beat the S&P') but this may not be nuanced enough to help them meet their goals. Because of this, setting customized goals based on the client's financial situation is a value-add for advisors. 

Additionally, with the rise of self-directed options, it's important for advisors to quantify the value of their high-touch service. Another way advisors can drive higher returns is to focus on a niche client set. This may allow advisors to fine tune their approaches (like rebalancing strategies, risk tolerance models, etc.) based on repeatable use. 

Advisor takeaways: 

• Understand the behavioral bias that can drive irrational client behavior, and be comfortable advising clients against their instincts in order to preserve gains. For example, perhaps your client’s financial situation as a child has made them intolerant to risk for their newborn’s college fund, despite the fact it has 18 years to grow.
• Have a process for establishing benchmarks that fit the client's financial situation. Decide in advance that your client should have X amount in a fund by a certain year, and plan to do a touchbase when they reach that point.
• Clearly articulate how your service offering directly ties to helping maximize client returns