How an Advisor Adds Value

12/1/2021

 Many investors weigh the potential benefits of hiring a financial advisor against the cost of working with one.  There needs to be a clear value to the investor before they would even consider such a relationship. That value can be established a number of different ways, or through a number of different services the advisor provides.  

According to recent research from Spectrem Group, the most valuable part of working with an advisor is that the advisor provides unbiased advice, which is a sentiment felt by over two-thirds of wealthy investors. The advisor having knowledge that the investor is lacking is also a very valuable component to the advisor/client relationship. The 63 percent of investors who identify that as a valuable component of working with an advisor likely are familiar with the idea of utilizing experts in various fields for exactly what they are: experts who know more than the investor does about certain topics.

The only other component that more than 50 percent of investors feel is valuable is that the advisor keeps them from making bad investment decisions. This is far more of a nebulous concept since a “bad investment” can be interpreted many different ways, however it is important to know how valuable investors feel that part of their advisor relationship is.  

Investors in Information Technology are more likely to feel most services received from an advisor are valuable, however Business Owners are more likely to value an advisor keeping them from a bad decision or educating them on financial topics. There is very little difference in what is valued based on wealth levels, which is extremely important for financial providers to be aware of in that the financial services valued by of investors with a net worth between $100K-$1MM are very similar to those with a net worth in excess of $15MM. 

Age plays a significant role in what types of services are valued by investors. Baby Boomers and WWII investors are far more likely to value an advisor providing unbiased advice and having knowledge the investor is lacking. Millennials are more likely to value receiving guidance during turbulent times, the advisor helping navigate financial challenges, and budgeting, with nearly half of Millennials indicating that a budgeting tool is helpful.

The only service that more than half of wealthy investors feel they do not need from their financial advisor is budgeting. That is not to say that these individuals do not have budgets, it just means that they do not feel that it is necessary for their financial advisor to be a part of the creation or management of the budget.

Financial professionals are constantly trying to create value with their clients, so investors can help their advisor out by sharing what types of services will create that value. Is it helping them buy low and sell high, or keeping them from making bad decisions? It is helping them with accountability to following their financial plan, or establishing goals? Regardless of what each investor’s valuable services are, all parties can benefit from the clear communication of what services are valuable and expected from their financial advisor.