Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 222

What do investors value in financial advice?

Challenged on one front by robots and on the other by a general reluctance among the wider public to pay for advice, some financial planners have been experiencing an existential crisis in recent years.

One obvious response among advice firms has been to fight the technology-led commodification of advice by going for scale, cutting costs and industrialising processes as much as feasible. A second response has been for advisers to stop and ask themselves exactly what it is that investors (or at least those willing to pay for financial advice) feel they value most from the human side of the service. A third response, and one pursued in a new global survey, is to ask investors themselves what they value.

The survey of almost 19,000 investors (clients of 436 participating firms in eight countries) by Dimensional Fund Advisers offers insights for firms reflecting on what they can offer and charge for beyond what’s available in an app.

Investment returns rank below security and peace of mind

The most notable outcome of the survey, which covered Australia, New Zealand, the US, Canada, the UK and Europe, was that investment returns rank well below other more qualitative factors for end investors. Asked how they primarily measure the value they receive from their adviser, investors’ most cited benefit was a sense of security and peace of mind, which was the top value among 35% of respondents. Second on the list was the adviser’s knowledge of their personal financial situation (23%), followed by a sense of making progress toward their goals (20%). Investment returns came in fourth among the key benefits at 14%. While all this might seem predictable at first glance, it’s arguable whether many financial planning firms really position themselves primarily in that light, as wealth counsellors and behavioural mentors.

While advisors may be tempted to promote their value as ‘generating good returns’, the real value they offer is getting clients to where they want to go. Returns are part of that, of course, but the advisor’s main value-add is keeping clients focused on the areas within their control. Promising ‘good returns’ only means having to explain when markets don’t deliver.

For instance, a financial plan that involves taking big risks in volatile assets whose ups and downs are more than the client can comfortably live with is probably not going to be a successful plan in delivering on the goal. In contrast, a plan that works within the clients’ risk preferences that allows them to sleep at night and that is built according to their own lifestyle and circumstances may be more successful, even if short-term returns are less eye-catching.

In other words, the destination is more achievable if the journey is tolerable. And that’s the value proposition for advisers that surfaced in this survey.

What can be controlled?

According to Dimensional’s co-CEO and Head of Global Financial Adviser Services, Dave Butler, the value that investors place on a sense of security is really an outcome of advisers setting the right expectations with each client. “By helping clients understand what they can and cannot control, advisers can create a different experience to help ease their concerns,” Butler says. The importance of the day-to-day experience also came through in answers to the question about what attribute investors consider most important in the adviser relationship. Of the survey sample, 31% cited the client service experience, while 26% said they ranked the adviser’s experience with clients like themselves.

With Australia’s superannuation system moving away from a lump sum to a retirement income goal, the survey’s findings were revealing. Asked to identify the most valuable retirement planning information they receive, 28% of respondents cited knowing how much they will be able to afford to spend each year, ranking ahead of the total amount they will have for retirement (22%). Correspondingly, the single most cited fear about personal finances was not having enough to live on comfortably in retirement (37%), followed by experiencing a significant loss in a market downturn (31%).


Jim Parker is Regional Director, Communications, for Dimensional Fund Advisors in Sydney. Dimensional has 12 offices in eight countries and global assets under management of AUD675 billion as at 30 June 2017.


The link between financial and mental health

Kitces Part 1: How robo misunderstood the advice model

Richard Thaler: Nobel economist changing our behaviour


Most viewed in recent weeks

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

Coles no longer happy with the status quo

It used to be Down, Down for prices but the new status quo is Down Down for emissions. Until now, the realm of ESG has been mainly fund managers as 'responsible investors', but companies are now pushing credentials.

Latest Updates


The 'Contrast Principle' used by super fund test failures

Rather than compare results against APRA's benchmark, large super funds which failed the YFYS performance test are using another measure such as a CPI+ target, with more favourable results to show their members.


RBA switched rate priority on house prices versus jobs

RBA Governor, Philip Lowe, says that surging house prices are not as important as full employment, but a previous Governor, Glenn Stevens, had other priorities, putting the "elevated level of house prices" first.

Investment strategies

Disruptive innovation and the Tesla valuation debate

Two prominent fund managers with strongly opposing views and techniques. Cathie Wood thinks Tesla is going to US$3,000, Rob Arnott says it's already a bubble at US$750. They debate valuing growth and disruption.


4 key materials for batteries and 9 companies that will benefit

Four key materials are required for battery production as we head towards 30X the number of electric cars. It opens exciting opportunities for Australian companies as the country aims to become a regional hub.


Why valuation multiples fail in an exponential world

Estimating the value of a company based on a multiple of earnings is a common investment analysis technique, but it is often useless. Multiples do a poor job of valuing the best growth businesses, like Microsoft.


Five value chains driving the ‘transition winners’

The ability to adapt to change makes a company more likely to sustain today’s profitability. There are five value chains plus a focus on cashflow and asset growth that the 'transition winners' are adopting.


Halving super drawdowns helps wealthy retirees most

At the start of COVID, the Government allowed early access to super, but in a strange twist, others were permitted to leave money in tax-advantaged super for another year. It helped the wealthy and should not be repeated.



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.