Advisers putting clients ahead of products are having success regardless of the environment they’re operating in according to research from asset manager Dimensional Fund Advisors.
Dimensional co-head of client group Nathan Krieger tells Professional Planner the feedback they received from advised clients is about understanding individual goals and aspirations.
“The advisers that are having success regardless of the environment they’re operating in, they’re firmly focused on the client, they’re trying to solve client problems and putting products secondary in the conversation.”
Krieger says the firm surveyed advised clients and found peace of mind, being on track with their personal goals, and knowing their adviser understands their circumstances are the top three priorities.
“Products and investments fall after that. For the adviser that’s orientated to those goals, we’re seeing them succeed regardless of circumstance.”
The biggest transfer of wealth
When it comes to client circumstances Krieger noted the “massive” wealth transfer is underway as baby boomers pass on their wealth to their children.
“Those that may not have the money today will be influencing the future and it’s critical for those that are providing professional advice to speak to them about the needs they have in an efficient way,” Kreiger says.
Advisory firm Scientiam founder Nigel Baker says advisers are at capacity and finding talent is a challenge.
“We’re trying to recruit and it’s been tough. There’s a real gap and technology has to be part of the solution. The good firms need to bring in technology simply to deliver a service to more people.”
Digital advice has been proposed as a solution but Quality of Advice Review lead Michelle Levy noted trepidation from the industry to take on any risks that could put them at regulatory risk.
Research from CoreData found a face-to-face relationship with an adviser is also preferred by clients.
However, Baker says without intervention from digital advice the advice gap will continue.
“We know it’s become more expensive but there are ways to bring technology to help more people at a lower cost and at different scales of advice,” Baker says. “Some firms are only going to deal with high-net-worth families.”
HNW clients are highly valued in the industry and proved resilient during the Covid-19 pandemic, but are a niche market that not all advice practices are built for.
“I’m not critical of those but luckily there’s lots of advisers who see their responsibility to help more people and realise there’s only so many hours in the day and technology is a way to enable sharing this knowledge.”
OpenInvest chief executive Andrew Varlamos says digital investing solutions are a means of helping wealth management and advice firms address the advice gap.
“With an estimated $1 trillion in wealth moving between generations over the next decade, it’s logical for progressive wealth management firms to be reaching out to help the next generation now – not after they have built their wealth to what a firm might traditionally have regarded as their minimum threshold,” he says.
Krieger added the need for advice hasn’t diminished, it’s increased.