To accurately recognise the true worth of their services, financial advisers must acknowledge the value they provide for their clients is multidimensional and that emotional value plays a critical part, an international fund manager has said.
The multidimensional aspects of value financial advisers need to be conscious of are portfolio value, consisting of portfolio construction and client risk tolerance, financial value, referring to the attainment of financial goals, and emotional value, associated with financial peace of mind, Vanguard investment strategy group senior research analyst Cyndy Pagliaro told delegates at the Sydney leg of her organisation’s adviser roadshow today.
Pagliaro pointed out recent Vanguard research revealed emotional value is pervasive even though it is the pillar that is often ignored or downplayed.
She noted the research found four main factors driving consumer sentiment when assessing the value of advice.
“I need to have my plan continuously monitored and updated, I need to completely trust that my adviser will put my best interests first, I need to feel a personal connection with my adviser and I need to [receive] investment expertise. Those are the attributes that are driving value,” she said.
She added advisers have to be aware that while some of these factors appeared purely functional on the surface, a level of emotional value existed in all of them.
“Take the top [factor], that need for continuous plan monitoring. To us that felt very functional,” she said.
“But when we looked at the data, it clusters so strongly with emotional attributes so we thought we just can’t disconnect it.
“A functional view of this would be: ‘I need to have my plan continuously monitored and updated because that’s why I hired a financial adviser. That’s the expectation I have.’ Purely functional in nature.
“The more emotional view would be: ‘I need to have my plan continuously monitored and updated because if something goes wrong I need [the adviser] to react so I’m not negatively impacted, I’m not hurt by it.’ That feels more emotional.
“So I could do that exercise with each of these attributes and some will be more emotional and some will be less.”
As such, she concluded emotional value exists and is too big to ignore.
“So any work that you’ve been doing in that client-adviser relationship to work on trust, to work on personal connection, is all adding value,” she said.
The current advisory landscape in Australia makes a focus on emotional value even more important, she said.
“Now in the environment that you’re in today, structural change, regulatory oversight and fee pressure, [it] has never been a better time to actually continue to foster those relationships,” she said.