The values investors place in financial advice

What Investors Value in Advice

September 18, 2017

LPL Financial

The value you provide to clients can’t be measured only by the bottom line on your clients’ investments. Your holistic approach to their financial well-being includes financial education, an accessible sounding board, and someone to monitor market and life changes to ensure they’re on the path to their goals.

The large majority of Americans (85%) report feeling financial anxiety today.

- 2016 Northwestern Mutual Planning & Progress Study

Why Seek Advice?

You know the value you provide to clients can’t be measured only by the bottom line on their statements. Along the path toward helping your clients find solutions for short- and long-term goals, there are myriad choices to make based on opportunity costs such as managing the tax burden, providing peace of mind with insurance, and making sound decisions during volatile markets.

Whether they’re unaware of the consequences of such decisions or intimidated by the prospect of fees, many people never make the move toward working with a financial advisor. In fact, while the percentage of Americans seeking financial advice has increased since 2010,1 more than half still don’t have a financial advisor, despite reporting that they feel more financial anxiety than they did in 2013.2

Given the disconnect between the share of people who feel uncertain about their financial futures and the number who seek guidance, what prevents them from seeking advice?

Barriers to Seeking Advice

The reasons people don’t seek advice vary depending on their financial circumstances and level of financial education. Some of those reasons have developed only in the last decade, including lingering mistrust of financial institutions following the financial crises of the 2008 and the rise of low-cost robo investment platforms. Other reasons include:

  • Difficulty judging the value of—and justifying—the fee
  • Lack of awareness or education in the complexity of the options available to pursue their goals
  • Overconfidence in their ability to handle their financial matters

The Benefits of Seeking Advice

For those who may think they don’t need advice or don’t think they can afford it, you may want to approach the conversation by highlighting the service value they may be unaware of.

Some potential investors, for example, may think they’re saving as much as they can for retirement through a defined contribution plan. But they may not have considered the real possibility that they may outlive their savings or face rising healthcare costs due to chronic illness or the need for long-term healthcare. Are they aware of the difference working a few extra years can make in the accumulated Social Security benefits they’ll receive? Are they aware of the difference rebalancing can make as they age?

The value you offer is, in part, the answers to these questions—which they may not see in the short-term bottom line.

Your holistic advice can guide them through changes in current spending decisions that will enhance their ability to meet goals such as buying a home, saving for college, or paying off student debt, as well as enhancing their ability to pursue their financial goals in retirement.

Articulating Your Value

Prospective clients who are wary of paying an ongoing fee may have a different outlook when they discover that your fee encompasses a wide variety of services that may or may not always be apparent in their bottom line—and that they will be able to rely on an experienced and knowledgeable advisor whose guidance could enable them to better react to change and realize their goals.

In addition, your holistic approach to their financial well-being includes financial education, an accessible sounding board, and someone to monitor market and life changes to ensure they’re on the path to their goals.

Following are some talking points you can use to help educated prospects in the many ways in which a long-term relationship with a trusted advisor can help them address both their short- and long-term goals:

  • Reaching financial goals may become more complicated or change as you change careers, buy homes, attend college, and near retirement. The decisions you make on spending, employee and Social Security benefits, insurance, debt, and investments should be based on your unique circumstances and goals. I can help guide you through change and help you recognize when a better solution may be appropriate based on shifting circumstances, and help remove the burden of making potentially life-altering decisions alone.
  • Thoroughly understanding changes in tax implications, new investment products, the best time for rebalancing investments, the use of insurance products, and the suitability of estate planning solutions—among other financial matters—can be time consuming and ever changing. A relationship with a financial advisor can help you ensure that your decisions stay aligned with your goals.
  • There is a vast and evolving array of financial instruments available, and the choices and mix that are appropriate for your goals depends upon risk tolerance, age, and life circumstances. Financial advisors stay on the forefront of knowing what’s available and whether they’d be a good fit for you.
  • Even a knowledgeable investor may react emotionally to either a declining or rising market. A financial advisor can be a sounding board and source of objective guidance during times of volatility, helping you make—or avoid—decisions that could alter your ability to meet your goals in the long term.

1 “2015 Consumer Opinion Survey,” Conducted by Penn Schoen Berland Research on behalf of CFP Board, Sept 2015.

2 “2016 Northwestern Mutual Planning & Progress Study,” conducted by Harris Poll on behalf of Northwestern Mutual, June 2016.