Let’s face it: Things have changed.
The expansion of online investing tools has seen some financial professionals’ clientele disengage. Factor in the pandemic’s impact of favoring widely available remote conferencing instead of in-person meetings, and that gap widens.
Many people have simply moved on from traditional financial ways as technology advances to allow for more self-service or investing from a distance.
Financial professionals fully understand the value they bring to a client’s retirement planning strategy. But is there a disconnect between what investors deem valuable and what financial professionals think investors want?
The top priority of both is to reach the client’s financial goals. But financial professionals may need to add even more value to what they bring to the table — and that can be accomplished by a deeper emotional understanding.
A financial professional’s role in annuity selection
Of course, financial professionals have to bring the basics first, which means setting up their client with the right vehicles toward a secure retirement.
One of the more recent investments that might have seemed a bit more robo-proof in the past is an annuity. Traditionally, there was a greater need for professionals to walk investors through the nuances of each annuity product due to their complexities and sometimes 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. While a more informed investor is always a good thing, this increase in consumer confidence may make some investors more likely to take a DIY approach to all their finances and not bother to seek counsel from a professional.
Such a scenario stresses the importance of demonstrating a financial professional’s value beyond simply buying and selling on behalf of clients. Just pointing investors toward the right equities and insurance products no longer effectively differentiates in an age where they can receive that level of guidance from artificial intelligence, predictive analytics or algorithms.
Gauging investors’ emotional needs
It’s a given that investors typically base the value they receive from a financial professional on returns, but that’s not the only measurement to be considered. A sense of security and peace of mind — which may not always be possible with a DIY approach — play a major role in whether someone will enlist the help of a financial professional.
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, guidance from a professional who’s weathered previous storms may be welcome.
These types of deciding factors are as much about emotions as they are about finances. It raises the question…
What are financial professionals doing to address the emotional needs of investors?
Some investors who’ve dipped their toes in self-serve investing have come to realize that online platforms have an Achilles heel: a lack of ability to gauge clients’ emotions, ask the right questions, probe deeper or help them make rational decisions 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’s wise for financial professionals to re-examine what that looks like in today’s investment landscape. The human touch might look different today than it did a few 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 could help clients benefit from both worlds. More than ever, however, it’s critical for financial professionals to position themselves as more than just investment managers.
What can investors get from a living, breathing professional that they can’t find from impersonal online investment services? Effectively managing clients’ emotions and serving as educators, advocates, coaches and counselors is key.
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. Plus, 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.
What then? How will a DIY online investment platform guide them through this turmoil? You know the answer: it can’t.
These types of life events stir up a host of emotions that, left unmanaged, could lead to irrational impulses and poor financial decisions.
When financial professionals can demonstrate their value based on both long-term results and a human understanding of the uncertainty of life, it may tip the scales in their favor. Using Behavioral Financial Advice tools can help financial professionals hone their skills in guiding clients toward financial decisions that align with their personal values and long-term goals rather than reacting on impulse to emotional situations.
These award-winning tools are available 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.