“What brought you here today?” 

It’s a common starter question from an advisor to a prospective client during the first sit-down meeting. You’re both trying to get a feel for the other, eyeing clues as to whether the relationship will be the right fit for parties on both sides of the table. Often, individuals or couples have already begun to feel overwhelmed by a growing pile of financial obligations and have little handle on what their true “goals” should be. Ask them to pin down what they are saving and investing for, and uneasy or blank stares will likely come back at you. 

On the Minds of Would-Be Clients

Morningstar recently conducted a study on what brings retail investors to financial advisors. It turns out that there’s no one specific need or money gap that they are looking to fill. Rather, there are a host of reasons and issues plaguing today’s growing mass-affluent crowd. What’s sometimes tricky for numbers-focused money managers to grasp is that there are important emotional-based factors that contribute to the decision to hire a financial advisor. That’s why you need the right tools and support to ensure your practice is capable of checking all the boxes in order to build not only a large book of business, but the right clients, too.

The Human Connection

Amid rising concerns of artificial intelligence taking over the world, it appears the job of a wealth manager is safe for now. We have all been witness to the sudden rise of robo-advisors, and their subsequent struggle to connect with people at a deeper level. However, when volatility kicks up or when folks get closer to key financial milestones, there’s an innate desire to converse with a trusted financial pro, not some algorithm. 

Morningstar’s report buttresses the case that an individual investor’s decision to seek help from an advisor is more than just a numbers game. While it’s certainly critical that you and your firm have the tools and technology to help people hit their targets (such as getting to retirement, investing a windfall, and managing cash flow), behavioral coaching (think peace of mind) is rising in prominence. That is a fascinating turn of events considering it was not long ago that everyday investors largely dismissed behavioral alpha as being a primary motivator for seeking assistance with personal finances and investment decisions. 

Digging into the findings, there are two primary reasons Main Street investors hire their advisor:

1. Discomfort handling financial issues: This should raise some eyebrows. There’s a thread of emotional uneasiness going on here. It’s not so much the black-and-white “Am I going to retire on time?” or “Can I afford to send my kids to college?” but rather “I’m unsure how to do this and it is weighing on me and my spouse.” Also, the results underscore the need for advisors to help their clients simply stay the course. We see this reason (most cited by the survey’s respondents) as quite vague, indicating there are deeper money issues at play. Halo understands that reality, and our experienced team is an extension of staff for financial planners with whom we partner to help relieve financial anxiety among individual investors and strengthen the client-advisor relationship.
   
2. Specific money needs: Just as common as being emotionally uncomfortable with making wealth management decisions were the financial matters themselves. Planning for retirement was the more frequently cited reason for paying for advice and asset management, but if we do some sifting, it’s found that better income planning is a key task and area where people want solutions. The desire for guaranteed income is mentioned, and we assert that annuities and structured notes may help relieve this financial burden that so many older prospective clients often encounter. Not surprisingly, a material percentage of survey respondents indicated outright that they wanted help “setting up an annuity.” Having the right financial tools at your ready as an advisor is critical. So too is having product knowledge and the right team to back you up. Along with somewhat fuzzy responses such as “looking for a wealth manager with proven results” and “excellent referrals,” newer investors simply want to get started investing. Building an investment plan is usually straightforward, but as clients mature and account sizes swell, protecting what they’ve earned and generating income from that asset base becomes all the more valued by clients.

Security More Important Than Bigger Numbers

A theme that echoed throughout Morningstar’s study is that the average person or family just wants to feel more secure about the future. They hire someone to be by their side, helping them grow more confident about what lies ahead financially. 

Let’s face it: People (including the advisory community) are inundated with the latest investment fad (be it an ETF, a certain group of stocks, or a tax strategy). At the same time, the world of personal finance is more complex than ever. A new tax-advantaged savings vehicle seems to sprout up each year, while quickly shifting interest rates and rising and ebbing inflation add additional layers of market unpredictability, leading to a wider range of possible financial outcomes. 

That’s why protective investment strategies such as annuities and structured notes can work not just when crunching the numbers in software programs, but also when sitting down at the conference table during an introductory meeting.

The Advisory Industry Is Set to Grow Further

You should feel encouraged by other realities prevalent in the study. The survey revealed that among the more than 3,000 people who responded, barely more than 600 reported that they were working with a professional advisor (just 21% of the sample). 

In the U.S., roughly 1-in-3 Americans have hired and are currently teaming with a wealth manager, whereas the percentage is lower in the U.K. Here’s the opportunity: 62% of Americans acknowledge that they need help improving their finances. The crux of it is that a wide gap exists between those who are paying for advice and the total sum of folks who need advice. 

Now, it’s likely that people of more modest means would like help, but they are frankly not ideal clients from a revenue standpoint. But the latest trends in household assets and net worth suggest that more families are climbing into the mass-affluent category due to a rising stock market over the last decade and a strong nationwide housing market. Moreover, with steady contributions to employer retirement savings plans (as seen in the latest “How America Saves” report issued by Vanguard Group), a growing pool of potential clients could soon be knocking on your door (or shooting you an email).

The Bottom Line

Retail investors crave help with their money, they just don’t know where to start. There are both cut-and-dried reasons, such as wanting to hit a specific financial milestone depending on their stage of life, as well as emotional needs that are usually tougher to pin down. Morningstar’s midyear study is fun summer reading, no doubt about it, but we assert it proves there’s an emerging trend — behavioral coaching and financial security are increasingly cornerstone value propositions for today’s advisor. Protective investment strategies can help clients across many financial stages of life not only get to their goals but also help them feel more confident and at peace along the way.

Structured Notes have complex features and may not be suitable for all investors. They are sold only by prospectus and investors should read the prospectus and pricing supplement carefully before investing, as they contain a detailed explanation of the risks, tax treatment, and other relevant information about the investment. The tax treatment of Structured Notes varies depending on the offering, and can be uncertain in some cases. Structured products are sold through financial professionals, and investors should consult their accounting, legal, and/or tax professional before investing.

IMPORTANT: Annuities are not suitable for all investors. All recommendations for annuity products must be suitable and appropriate for the client and must be based on a thorough fact finding and understanding of the client’s unique financial situation, needs, goals and risk tolerance.

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