Do your clients’ expectations align with yours?

A recent study by international investment research company Morningstar shows there’s a gap between what people seek in a financial planner and what financial planners believe their clients want from them, and this disconnect may cause hiccups in the relationship.

In a presentation at the recent annual Morningstar Investment Conference, held in Johannesburg and Cape Town, Ryan Murphy, Head of Decision Sciences at Morningstar Investment Management, took financial planners and other delegates through the results of the survey on the financial planner-client relationship.

‘Our research suggests there’s a difference between what investors value from their financial planners and what the latter believe investors value. That disconnect may create problems on both sides of the relationship.

‘For financial planners, it’s hard to build a mutually beneficial relationship if clients don’t understand the advice they’re getting. And it can be frustrating for clients if it seems their financial planner isn’t meeting their expectations.

‘Our results show expectations around advice aren’t always aligned, but this gap can be bridged by understanding where the differences are and where the value exists in the client-financial planner relationship,’ Ryan said.

The research involved 693 investors being given a list of 15 attributes of a financial planner, which they had to rank in order of priority.

The same list was sent to financial planners, of whom 161 responded. They were required to rank the attributes in the order that they believed investors (their clients) found most valuable.

Investors’ top five:

  1. Helps me reach my financial goals.
  2. Has the relevant skills and knowledge.
  3. Communicates and explains financial concepts well.
  4. Can help me maximise my returns.
  5. Has a good reputation and positive reviews.

Financial planners’ top five:

  1. Understands me and my unique needs.
  2. Helps me reach my financial goals.
  3. Keeps my interests in focus with unbiased advice.
  4. Communicates and explains financial concepts well.
  5. Has the relevant skills and knowledge.

Morningstar’s research showed financial planners and investors were well aligned on the issues of helping clients reach their financial goals and communicating financial concepts in a way the client understands. It was also an accepted requirement on both sides that the financial planner had the relevant skills and knowledge.

Three attributes that showed a large disconnect:

  1. Can help me maximise my returns (ranked fourth by investors, 14th by financial planners)
  2. Helps me stay in control of my emotions (ranked bottom by investors, 11th by financial planners)
  3. Understands me and my unique needs (ranked 7th by investors, 1st by financial planners).

Ryan said it was concerning that maximising returns was so high on the investors’ list of values, when it was inconsistent with a financial planner helping an investor to reach their financial goals

He said it was important for financial planners to explain the difference between the two to their clients, and that it’s far more important for clients to achieve their financial goals than to strive for the highest returns.

On the question of the financial planner helping the client to stay in control of their emotions, the study showed investors underrate the value of behavioural coaching, which the advisory industry has found to be an effective tool in the financial planner’s armoury.

Ryan said it was possible the question was phrased inappropriately. Perhaps a better phrase, he suggested, would have been, ‘helping protect my portfolios from excessive emotional reactions’, in other words, from panic selling in a market downturn.

The third attribute that investors undervalued was the personalisation of advice, as encapsulated in the phrase ‘understanding me and my unique needs’.

Before proffering financial advice, the Financial Advisory and Intermediary Services Act requires financial planners in South Africa to assess the client, taking into account their financial position, personal circumstances, investment horizon, needs and goals. A financial plan must be tailor-made to best achieve those needs and goals, and any products recommended to the client would have to be appropriate to their circumstances.

Financial planner attributes 

  • Helps me stay in control of my emotions
  • Has a good reputation and positive reviews
  • Is knowledgeable on tax consequences of investing
  • Can help me maximise my returns
  • Is approachable and easy to talk to
  • Helps me reach my financial goals
  • Is easy to get hold of
  • Has a clear fee structure so I know what I’m paying for
  • Understands me and my unique needs
  • Uses up-to-date technology
  • Acts as a coach/mentor to keep me on track.
  • Presents him/herself in a professional manner
  • Keeps my interests in focus with unbiased advice
  • Communicates and explains financial concepts well
  • Has the relevant skills and knowledge.

It may be useful to do this exercise with your client.

* This article by Martin Hesse appeared in Personal Finance, 6 November 2019.