The expansion of big tech and online investing tools has been a wake-up call to some financial advisors as they’ve watched a segment of their clientele slowly disengage and distance themselves. Add to that the pandemic’s impact of taking in-person meetings to a virtual standstill and the gap widens.
Not only are some investors pulling back and choosing to shift their portfolios to online platforms, some may be going directly to online providers and skipping an advisor altogether.
Advisors fully understand the value they bring to a client’s retirement planning strategy. But is there a disconnect between what investors really deem valuable and what financial advisors think investors value?
The top priority of both advisor and investor is to reach the client’s financial goals. That’s unlikely to be disputed. How they get there, however, may be up for debate.
An Advisor’s Role in Annuity Selection
A financial vehicle that might have been deemed a bit more robo-proof in the past is annuities. Traditionally, there was a greater need for advisors to walk investors through the nuances of each annuity product due to their inherent complexities and often confusing contracts.
However, many of today’s annuity products focus on taking a simpler approach and doing away with complex jargon.
Easy-to-understand annuity products may allow risk-averse investors to feel more confident in their decisions to purchase such products on their own. A more informed investor is always a good thing. This increase in consumer confidence, however, may make some investors more likely to take a DIY approach similar to the one some have adopted for traditional equity investments.
Such a scenario stresses the importance of demonstrating an advisor’s value beyond simply buying and selling on behalf of clients. Picking and choosing equities and insurance products no longer effectively differentiates in an age of artificial intelligence, predictive analytics and algorithms that may, in the end, garner similar outcomes.
Gauging Investors’ Emotional Needs
It’s a given that investors typically base the value they receive from an advisor on financial returns, but that’s not the only measurement that most take into consideration. A sense of security and peace of mind plays a major role in whether someone will enlist the help of an advisor.
Clients likely appreciate the personal touch and insights into their unique financial situation. For those who question their own financial prowess, especially in an age of market volatility, the prospect of guidance from a professional who has weathered previous storms may be welcome.
These types of deciding factors are as much about emotions as they are about finances. It begs the question…
What are advisors doing to address the emotional needs of investors?
Some investors who have dipped their toes in self-serve investing have come to realize that robo-advisors and online platforms have an Achilles heel: these tools lack the ability to gauge clients’ emotions, ask just the right questions, probe deeper and help them make rational decisions that they won’t regret down the road.
A Differentiator: Behavioral Financial Advice
Relationship building has been a mantra of many in the financial services industry for decades, but it behooves advisors to re-examine what that looks like in today’s investment landscape. The human touch may look different today than it did even five years ago, and an even more holistic approach may be in order.
A hybrid model that offers online tools and a social media strategy in combination with personalized service may help clients benefit from both worlds. More than ever, however, it’s critical for financial advisors to position themselves as more than simply investment managers. They also need to effectively manage clients’ emotions and serve as educators, advocates, coaches and counselors.
Since the availability of online investment platforms is relatively new to some investors, the long-term outcomes for those who engage virtually are yet to be seen. Moreover, many who use them likely haven’t yet experienced various life events that may influence their financial outlook. Job loss, divorce, the death of a partner, an inheritance, health crisis and numerous other situations may be uncharted territory and leave them guessing their next moves, should such milestones arise.
These types of life events inevitably drive a host of emotions that, left unmanaged, could lead to irrational impulses and poor financial decisions.
When advisors can demonstrate their value based on both long-term results and an improved ability to navigate the certainty of uncertainty in life, it may help tip the scales in their favor. Using Behavioral Financial Advice tools helps advisors guide clients toward financial decisions that align with their personal values and long-term goals and not simply react to current market conditions or circumstances.
These award-winning tools are available to advisors to help explore clients’ motivators, biases, and limitations surrounding finances. Help differentiate your services by accessing this valuable library of Behavioral Financial Advice content today. Simply click the link below.