Why Investors Keep Their Advisors

New research by Morningstar finds emotional reasons are more important than financial ones.


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Positive financial returns play only a part in why an investor might stay with their financial advisor, according to new research by Morningstar.

Morningstar found that investors listed emotional reasons to stay with their advisor 59 percent of the time, compared with financial reasons, which were listed 42 percent of the time.

Discomfort handling financial issues on their own — an emotional reason — was the number one most selected motivation. This was followed by the quality of financial advice and services (financial) and an appreciation of the behavioral coaching they got from their advisor (emotional).

“These results support the importance of the interpersonal aspect of a financial advisor’s role,” wrote Morningstar.

The company also found that there was no correlation between demographics, such as age, race, gender, income level, or amount of investable assets, and investor responses.

“This lack of a finding actually has a fair amount of meaning behind it,” wrote Morningstar. “It points to the importance of these different motivations to investors regardless of their backgrounds or demographics. It also reminds us that who a person is as an individual likely provides deeper insights into their behavior than what kind of persona they typically fit into. In other words, you cannot judge a book by its cover, and personalization is really about the person, not a demographic category.”

Investors can be hard to please.

A study reported last year by J.D. Power found that investor satisfaction with advisors had plunged more than 17 points year over year. Past research from Cerulli Associates, a wealth and asset management consulting and research firm, found that more than 70 percent of heirs were likely to fire or change financial advisors after inheriting their parents’ wealth. According to 2019 McKinsey research, a similar percentage of women indicated they changed financial advisors after the death of their spouse.

However, Morningstar suggests there are behaviors that advisors can incorporate into their practice that help address both the emotional needs and financial needs of their clients, such as building trust and developing a strong personal relationship through “comprehensive discussions and frequent communication” and focusing on goal-based communication that ties an advisor’s advice to targets that highlight the value of their advice to clients.

Morningstar also suggests incorporating behavioral coaching even if it’s not specifically requested.

“Behavioral coaching was something clients often identified as a reason for keeping their advisor, but they did not tend to express this motivation so directly,” wrote Morningstar. “Instead, clients identify their need to feel confident that they are receiving guidance to help them make good decisions. This highlights the importance for advisors to take the lead in providing behavioral guidance to clients even though this may be a service that clients never specifically request by name.”

The Morningstar research was based on four surveys conducted in 2021 and 2022 that, among other questions, asked investors to “list some reasons why you continue to have an advisor.” Of the 3,003 responders, only 620 worked with an advisor.

Other emotional reasons for staying with an advisor included “quality of relationship with advisor,” “quality of communication with advisor,” and “recommended by friends/family.” Other financial reasons for staying with an advisor included “specific financial needs,” such as planning for retirement or tax planning; “return performance-driven factors”; and “cost of services.”

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