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4 Warning Signs Investors Aren't Happy With Their Advisors

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What You Need to Know

  • Big shifts have occurred during the pandemic in what consumers want and need from advisors and how they perceive and value them.
  • Almost one-third of survey respondents want to talk to a human advisor outside of business hours and when they really need them.
  • Firms that train advisors to work differently with clients will have a substantial competitive advantage.

Complacency is one of the biggest threats to any business. Even if a firm has a long track record of success, subtle shifts in customer expectations and satisfaction may pose hard-to-detect risks.

In our consulting work, we started to see evidence of a significant shift in consumer behavior, so we conducted a study to gauge those risks. We wanted to understand the extent to which the changes might impact advisory firms and how we might help them navigate going forward.

Therefore, we surveyed 1,000 consumers nationwide using a third-party firm. Respondents had more than $250,000 to over $6 million in assets; slightly more than 50% were male and about 70% were partnered.

Our survey confirmed that big shifts have indeed occurred during the pandemic period. These include changes in what consumers want and need from advisors and how they perceive and value them. While it’s too early to say whether the changes will outlive the pandemic, advisors need to know what’s going on so that they can decide how they should respond today and in the coming year.

Survey questions ranged from what made the respondents happy or unhappy about their advisor, to what specific technology they wanted to have available, to which methods of communication they preferred.

Of the respondents, slightly more than 60% said they employ a financial advisor. Four findings stand out as most important for advisors today.

1. Low Patience Tolerance

One of the primary observations about advisors was about availability. In other words, how fast consumers can get ahold of their advisor. We did not ask respondents to define timeliness.

One-third of respondents stated they want more contact outside of meeting time and 28% want virtual meetings. In other words, they want to talk to a human advisor outside of business hours and when they really need them.

In our consulting work, we know that clients’ expectations in this area have changed dramatically. Instead of being content to wait 24 hours, or until the end of the day, the window of patience now appears to be about 90 minutes. If the advisor does not respond within that time frame, the consumer’s trust in, and opinion of, the firm tends to decrease.

2. Questioning the Value of Financial Advice

Among the survey’s most striking findings was that consumers, both those with an advisor and those without, are beginning to question the value of financial advice. In fact, 39% of men and 30% of women reported that they were unsure of the value that advisors provide.

We cannot yet define exactly what the consumer perceives as value, but we do see indications that they don’t fully understand the process advisors go through behind the scenes in managing money and preparing advice. Questions about advisory value likely are intensified by slow communication on the advisors’ part.

While advisors can show clients their financial plans or investment reports, a key component of their value is being able to articulate what they do behind the scenes for the client when not in the meeting.

3. Growing Lack of Trust

Our survey found that one thing making consumers most unhappy is a belief that advisors are making judgments on their personal decisions. Twenty-one percent of men and 19% of women are lacking trust. In other words, 1 in 5 people don’t trust their advisors and the financial services industry.

We know that over the past year many consumers have taken an interest in cryptocurrency and private investments or left stable jobs in search of greener pastures. Some advisors may not support these kinds of decisions, and/or loss of income to an already determined financial plan. But along with slow response times, advisors’ judgmental response gives consumers another reason to hide information and to question whether the industry is trustworthy.

It’s not that consumers don’t value advisors’ technical knowledge — their ability to manage assets and run financial plans. But these selling points are not enough.

The information gathered in our survey suggests that consumers want and need more time to discuss their goals and their changing values — and a person to hear them out — whether they act upon them or not. They want the conversations to be judgment-free. Also, 1 in 4 want to have the discussions virtually rather than in the advisor’s office.

4. Hiding Assets and Other Relevant Information

Findings also were remarkable when we asked survey respondents what information they’re holding back from their advisors. Consumers reported that they’ve failed to discuss their authentic goals, other financial accounts and key details concerning their family history and personal relationships.

The most common information consumers hide is outside financial accounts; 1 in 4 men and 1 in 6 women are holding something back from their advisor.

We also found that consumers with between $250,000 and $6 million of assets now prefer somewhat of a DIY approach, where they have more discretion over their accounts. Of course, if they aren’t getting the timely response they need from their advisor, and they don’t understand the value of what he or she delivers, and further, feel they cannot trust the financial services industry, it’s to be expected that they’d start to hide things from their advisor.

Gaining a Competitive Advantage

It will take time to sharpen up the picture of consumers’ changing desires, expectations and behaviors. It’s conceivable that the changes will fade over time along with the pandemic. Or they could mark the start of a durable, long-term trend.

But I do see a clear message here for wealth management organization leaders, and it has to do with human capital. Firms that train advisors to work differently with clients will have a substantial competitive advantage in years to come.

That training should cover how to effectively connect and communicate virtually. The Zoom dynamic is very different.

Advisors on video calls can’t just pretend they’re sitting in an office with their client. Building interpersonal communications techniques for a virtual environment, or for that matter how to broach questions about clients’ feelings, goals and changing values, is becoming even more critical to the success of advisory firms.

The theme of capacity also is key. Advisors must have slack in their weekly schedules so that they have ample time for impromptu inquiries. Communication that anchors and deepens relationships takes time, and it’s not possible if an advisor is juggling too many clients.

Advisors should be able to skillfully draw clients out, without judgment, about whether and why they’ve added outside accounts, and about how and why their values and goals might be changing. They should take time to explain all the “backstage” work that goes into investment advice, financial planning and answering inquiries. Doing so can help to shore up consumers’ perceptions of their value.

Our survey findings support what many of us have observed in recent years: Financial advice is shifting from being mainly about numbers to being mainly about communication. Firms that embrace communication training and allow their advisors the bandwidth they need to have meaningful discussions with clients will have an edge. That certainly will hold true in the next year, and it may very well be true for the next decade.

Angie Herbers is an independent consultant to the advisory industry. She can be reached at [email protected].