4 Tips for Advisors to Stand Out: Morningstar

"Our research supports what many have suspected: Highlighting return numbers and focusing on risk metrics isn't enough to build long-lasting trust. Now, investors expect personalized strategies that align with their goals and risk tolerance — and are explained to them in terms they understand," the report says.

"Successful advisors will not only need to develop comprehensive plans but focus on providing emotional support to investors, finding opportunities in private markets, and adopting generative AI into their workflows," it says. "By understanding how to differentiate their practices, it can be easier for financial advisors to gain an edge and strengthen client relationships.

Morningstar based the study on 527 online responses from U.S. participants represented across gender, generation, firm type, career tenure, size of practice and assets under management.

Among the key findings, the study found that advisors feel greater unease around timely trends versus evergreen issues, with their top market concern, for example, shifting from tariffs and trade policy last summer to economic slowdown and recession in the fall. Only 44% reported feeling generally optimistic about the market.

Evolving client demands reflect more engaged investors, the study also found, with over 20% of advisors saying that service expectations like real-time communications have changed the most in the past two years. Over 40% of advisors, however, say that client expectations didn't move much the past two years.

The rise of private markets has brought challenges for advisors, including concerns about fees, limited liquidity and lack of transparency into underlying holdings, the report says. Meanwhile, nearly half of advisors surveyed are unsure whether artificial intelligence will help or threaten their practices.

Morningstar's report offered four broad tips for advisors seeking a competitive edge:

1. Build a client-focused practice.

"Market volatility may be inevitable, but it's possible for advisors to develop a well-rounded approach that prioritizes investors' goals — not just their returns," Morningstar says. "By cutting through the noise and focusing on the fundamentals of investing along with goal attainment, financial advisors can be a source of calm for clients while delivering long-term solutions."

Advisors surveyed reported that just over half their workweek focused on client-centered activities, such as identifying goals or customizing a strategy. Nearly 60%, however, "would ideally like to spend even more time on these efforts," Morningstar says.

2. Focus on investors' non-financial needs.

"While returns still matter, clients value the emotional support provided by advisors and want to be more involved in the decision-making process," the report says.

Morningstar found that the overall satisfaction rate for investors working with an advisor full-time significantly outpaced those who took a hybrid or self-directed approach.

"This underscores the vital role advisors play — not just in managing portfolios, but in providing the confidence, guidance and personalized support that help clients feel secure and empowered in their financial journey," the firm said.

Advisors can emphasize their value by improving financial literacy, investment clarity and alignment with long-term goals, as well as the higher satisfaction rates among investors using advisors full-time, Morningstar said. The firm also recommended helping clients with guidance, tailored strategies and a sense of financial security.

3. Address private market due diligence challenges.

"Understanding the complexity of private investments may help advisors stand out from the competition," the report said, noting that global private fund assets under management have nearly tripled since 2015.

Advisors are uniquely positioned to include private equity, private credit, private real estate and infrastructure in portfolios, the firm said, noting that half of financial advisors already offering private investments expect their clients' allocation to increase over the next year.

While most advisors are comfortable discussing these investments with clients, they cite various obstacles and uncertainties, including wanting a better understanding about tax implications, the report says. By taking time to connect with asset managers, advisors may find clarity on their private markets questions and gain more clarity on reaching their goals, Morningstar suggests.

4. Use generative AI to manage tasks.

AI can streamline processes and improve communications, and about two-thirds of advisors surveyed are using the technology, mostly for internal processes to boost productivity, Morningstar says.

"By leveraging AI to streamline workflows, advisors can free up time to focus on what matters most — building deeper, trust-based relationships with clients," the firm says.

Advisors can identify the benefits and limitations of generative AI for their firms and how it can enhance rather than replace their services, Morningstar notes.

Image: Adobe Stock