Investment Trends' head of research, Irene Guiamatsia

A proliferation of self-directed investing during the pandemic era has led to a change in advice persona landscape, with research from Investment Trends indicating a stark increase in the number of HNW investors that are more vocal and want to work collaboratively with their adviser.

During the pandemic the number of self-directed investors “skyrocketed”, explained Investment Trends’ head of research Irene Guiamatsia at the SMSF Association’s national conference in Adelaide, with the desire for more control filtering down to those with SMSFs and those under advice.

The result, she believes, is a predilection for investors to come up with their own ideas and strategies instead of relying purely on external direction, yet still using an adviser for a sanity check to make sure they’re not making egregious errors.

“There is sort of a lurking trend beneath the surface… and that’s the rise of the validator,” Guiamatsia said.

According to Investment Trends there are three main types of “advice personas” among investors; delegators, validators and self-directed.

Over the last decade self-directed investors made up approximately 50 per cent of high-net-worth advice personas, with validators oscillating around 40 per cent and delegators (and ‘others’) combining for roughly ten per cent.

In an October report Investment Trends revealed that the number of validators had surged to 56 per cent recently, primarily at the expense of self-directed personas, which had fallen to 34 per cent, indicating that while people want to make their own decisions they’re increasingly keen to source financial advice – even if it’s on a consultative basis.

“Post pandemic, investors are vastly more likely to indicate they would be open to working collaboratively with a financial adviser to seek a second opinion or validate their investment ideas,” the report stated. “The “rise of the validator” has certainly arrived.”

What this means for the advice industry, Guiamatsia explained, is both a change in the way they advise and an increased focus on episodic advice as a delivery method.

“About 30 per cent of investors are using advisers and you have another 50 per cent who want to, but they want to engage differently,” she said. “This is a selective group of people who really want control, and when we ask their attitude towards financial advice it tends to be that they want to work with advisers.”

Speaking to Professional Planner on the sidelines of the event, Guiamatsia noted the difficulty advisers face in meshing the changing demands of clients, who want more flexibility in the way their receive advice, with the regulatory settings many believe inhibit the provision of episodic advice.

“The entire industry awaits, with baited breath no doubt, the findings of the Quality of Advice review due by year end,” she said. “It would be desirable to get a win-win-win outcome for investors, advisers and regulators.”