If you asked ten people to describe the role of their financial adviser, you would receive several variations. In a world of new technology, innovation and fast-moving markets, independent financial advisers are more valuable than ever. They provide a balanced approach to all areas of finance, personal, business and investments. However, a recent survey by Morningstar cast a fascinating light on the emotional value of an independent financial adviser.
We all know the basic role of the financial adviser, but let's put them down in writing:-
"Financial advisers provide clients with specialist advice on how to manage their money."
In reality, a modern-day financial adviser is likely to be involved in a broad range of topics, such as:-
There are various sub-sectors of the above topics in which you may be a specialist or be able to bring in a third party to provide advice to your client. The introduction of cutting-edge FinTech services has also made more information available to clients, prompting questions about different options and their suitability. It is fair to say that life as a financial adviser has changed!
On the surface, the Morningstar survey seems very simplistic and not particularly in-depth. It is only when you look at the feedback from participants that it prompts you to consider the broader role of a financial adviser. Those looking to appoint an independent financial adviser considered several issues, such as:-
A general discomfort around discussing and handling financial issues was the joint top reason for appointing a financial adviser. A significant 32% of those who replied to the Morningstar survey cited this as their main motivation. This ties in with an array of historical surveys, highlighting some people's discomfort in discussing finances.
An additional UK-based survey in 2022 by financial group Klarna found that:-
Unfortunately, many people feel embarrassed or inferior discussing finances when this should not be the case. If you want your car repaired, you go to a mechanic; if you want medical advice, you go to a doctor, so it makes sense that if you want financial advice, you go to a financial adviser. You wouldn't feel inferior talking to a mechanic or a doctor about their areas of expertise. Still, for some reason, many people see finance as ultra-personal and not for open discussion.
Unfortunately, an inability to open up about your finances could mean you don't receive the level and quality of advice required. In essence, you need to make your financial adviser aware of your broader financial scenario so that they can deliver the appropriate advice.
The survey also found that 32% of respondents hired an adviser because they had specific financial needs. This makes perfect sense; whether looking at investment, mortgages, tax planning or retirement, it is crucial to take specialist professional financial advice.
As mentioned above, the modern-day financial adviser can deliver advice across various topics. Whether you have a primary adviser looking after your affairs, seeking guidance on areas requiring additional assistance, or you appoint different specialist parties is a hot topic. If you select other advisers for different areas of your finances, these should be considered part of a wider picture, each an essential part of the jigsaw.
To put this into perspective, if each of your specialist financial advisers is working in isolation, they will have a partial picture of your finances, current and future expectations. One adviser may be working on a particular topic which requires input from another of your team to deliver personalised advice. Indeed, there may be some scenarios where different advisers move in very different and potentially contradictory directions. In this scenario, your advisers must be authorised to speak to each other to ensure they all deliver the best overall advice.
In a reflection of how modern day expectations of a financial adviser have changed, the third most popular reason for appointing an adviser was personal coaching (17%). This is an area in which I have been particularly proactive for some time, identifying the need to help clients committed to accumulating wealth in the safest, most efficient manner.
Personal coaching can help you retain a level head in challenging financial times, something we all experience occasionally. The ability to see the woods for the trees and discount short-term issues while maintaining focus on the long term is invaluable. There may be a need to react to short-term issues, but these actions must also appreciate the long-term consequences. Personal coaching is not targeted at short-term firefighting but a more long-term appreciation of financial goals and how these may need to be adjusted going forward.
Any independent financial adviser will live and die by their reputation, feedback from previous and existing clients, and the breadth of services offered. Therefore it will come as no surprise to learn that 12% of those involved in the survey cited a recommendation from family and friends as a reason to appoint a particular IFA. As an IFA, this is not an area where I can focus significant attention as it reflects the broader services I supply. If I deliver a high standard of advice to previous and existing clients, they will likely recommend me to friends and family.
While the emergence of the Internet now ensures that all financial service companies are held to account openly and transparently, too much information can sometimes muddy the waters. In a surprise development, personal recommendations from family and friends carry even more weight today than before the Internet. This allows you to ask questions about the services offered by a particular IFA and the treatment of friends and family.
As we see in the media each day, sometimes the headlines of a particular article (or feedback) don't reflect the detail. It is only when you get a chance to put specific comments and feedback into context that it gives the correct impression of the situation.
One of the main aims of any financial adviser is to create a rapport with potential clients, ensuring that both parties are at ease with each other and can be upfront and honest. Research shows that those advisers able to highlight the emotional and practical benefits of working with a financial adviser are likely to attract more clients.
Here are some examples of how this can be achieved:-
Interestingly, while many would see this as a strong selling point for an IFA, discussing "staying in control of emotions" appears to be counter-productive. In the eyes of a potential client, focusing on potential emotional weaknesses could make them feel uncomfortable and unwilling to open up.
As mentioned above, surveys and research have highlighted that many people don't discuss their finances with friends or family. Therefore, what they see as a specific issue or potential emotional weakness in their financial armoury may be a standard concern to many people. They may feel isolated, but they are not alone in these thoughts.
While the obvious focus is on financial advice, many people don't initially appreciate the emotional support provided by independent financial advisers. It is not uncommon for clients to develop a friendship with their financial adviser. After all, in most cases, you are divulging private and confidential financial information about you and potentially your family. Even though there are certain lines to be drawn, it is vital that a client and adviser have a rapport and feel comfortable discussing any issues.