Poll reveals disconnect between clients' appetite and advisors' assumptions
Knowing a client’s investing needs and preferences should be part and parcel of an advisor’s responsibilities. But when it comes to values-based investment, advisors might be falling short.
According to new joint research from the Money Management Institute (MMI) and Aon, 76% of clients say they aim to incorporate their values into their portfolios. However, only 44% of advisors surveyed said their clients express such an inclination.
“In today’s unprecedented environment, financial advisors have the opportunity to rejuvenate the planning process through a discussion of personal values,” said MMI President and CEO Craig Pfeiffer. “But by underestimating clients’ desires to align their investments with their values, they are missing a tremendous chance to improve client satisfaction and build share of wallet.”
According to the research, advisors appear to project a common bias against values-based investment onto their clients: that integrating values into investment strategies will eat away at returns. Because of that assumption, advisors conclude that clients have no appetite for such approaches.
However, the survey found a majority of clients believing that investments aligned with their values will produce the same or better returns; even assuming that returns are reduced, over half said they were willing to make that sacrifice for the sake of investing according to their convictions.
The rift between advisors’ perceptions and their clients’ actual appetite for values-based investing also appears to differ with age. Specifically, the survey found that advisors over age 55 tend to underestimate just how much clients prize their values, while advisors under 45 can in fact overestimate that importance.
The ability to align clients’ investments with their values may also be critical for advisors seeking to prove their worth. Researchers noted that when investors have their values reflected in portfolios, levels of financial-planning satisfaction and overall satisfaction both rise substantially. Those investors are also twice as likely to say that their wealth manager provides exception value for the fees they charge.
“Taking the time to understand and respond to a client’s personal values is one of the most effective ways to strengthen the relationship and enhance the perceived value delivered by the wealth manager,” said Peter Keuls, Global head of Wealth Management, Human Capital Solutions at Aon.
