In the ever-evolving world of financial advisory, personalization has transcended the status of a mere buzzword to become a fundamental aspect of successful client engagement. This is a sentiment echoed by Joe Agostinelli, Senior Director of Market Research at Morningstar – who points out the increasing preference of investors for tailor-made investment strategies that align closely with their unique goals and financial ambitions.
This approach transcends traditional metrics, focusing instead on tailoring advice to individual risk profiles and specific financial situations. The key is not just to meet financial objectives but also to respect the client's specific financial situations, spirations, and risk tolerance.
Morningstar's 2023 Voice of the Advisor research program provides a comprehensive view of the financial advisory segment through multiple studies and surveys. The research, which included surveying 400 investors, reveals that personalization in investment strategy primarily revolves around aligning clients’ risk tolerance with their goals and needs.
Interestingly, this preference for personalized advice becomes even more pronounced among investors with higher investable assets, particularly those above $250,000. Agostinelli says, “The data also reveals that non-investors consider personalization a key factor in deciding to start working with an advisor - this is in addition to a need for them to understanding dollar costs in that relationship, establishing trust/rapport, and demonstrating advisors know their stuff by taking an ELI5 approach to complex issues.”
Surprisingly, factors such as values alignment, commitment to diversity and inclusion, and shared cultural background, which may still be important for investors, rank lower in priority, even among a survey pool predominantly composed of people of color. This insight underscores the importance of where investors are prioritizing there financial planning.
The survey suggests that focusing on risk management can be an effective strategy for advisors looking to attract DIY investors, who typically rely on online investment resources.
Agostinelli adds, “Our brand research from 2022 examined investor perspectives, comparing those with a tech-led, DIY approach to investing against those guided by financial advisors, whom we refer to as 'advisor-led'.
“We found significant differences in financial concerns between the two groups. For instance, advisor-led investors generally worry less about retiring comfortably, likely due to regular discussions with their advisors about retirement goals and financial strategies. An advisor can reassure them, ‘Hey we are right on course to meet that objective.’
“They also express less concern about missing out on investment opportunities and feel more in control of their financial situation.
“Overall, the data suggests several advantages of engaging with financial advisors versus a solely technology-driven approach.”
Different barriers exist for non-investors based on their risk profiles. For risk-tolerant individuals, issues like market distrust, high fees, and time constraints are predominant, whereas risk-averse non-investors are concerned about high risks and market volatility. Advisors can tailor their strategies to address these concerns, focusing on education about long-term investing for risk-tolerant individuals and scenario analysis for risk-averse clients.
Agostinelli says, “This educational aspect is crucial, especially for risk-averse clients. By demystifying risk management and economic uncertainties, advisors can empower clients, transforming their apprehension into informed confidence.”
The research involving 650 advisors from varied firm types, reveals a trend where advisors are diversifying their offerings and dedicating significant time to client-focused activities. This shift is part of a larger trend in the industry towards broadening service portfolios in response to client demands for more comprehensive personalization. Advisors are now benchmarking themselves against their peers, assessing how their range of services and products align with or surpass industry standards. This competitive analysis is essential for advisors to recognise their position in the market and to identify areas for growth and improvement.
Understanding your strengths and potential for success is crucial, especially when considering the addition of new products and services. If advisors recognize areas where they lack competence or capability, it's beneficial to partner with specialists who can add value in those fields.
For example, advisors don't need to be real estate experts themselves; instead, they can collaborate with professionals in the real estate industry. This approach allows advisors to focus on their strengths while ensuring their clients receive expert advice in all areas, rather than attempting to master every aspect themselves.
The advisor survey also noted there's a noticeable trend towards offering a more comprehensive set of products and services. This expansion is a key aspect of the personalization trend. Notably, as advisors introduce more options, Agostinelli observes a correspondingly high adoption rate among clients. This indicates a strong consumer response to the increased personalization in offerings.
Agostinelli unexpectedly found, “One surprising insight from our research relates to where advisors feel they need more help or information. Initially, I assumed that advisors spent more time in certain areas because those were their strengths — their 'bread and butter', so to speak. However, our findings revealed a different trend. It turns out that the more time advisors spend in a particular area, the more they feel the need for additional help or information.
“This suggests that the increased time spent might not be due to proficiency, but rather a lack of efficiency or the complexity of that area. So, it's not always a case of sticking to what they excel in, but sometimes about addressing the areas where they require further improvement.”
The challenge of time management and the need for strategic decision-making highlight an essential truth in this evolving landscape: advisors must not only be knowledgeable but also agile and resourceful. The increasing reliance on support systems – be it technological tools, specialized partnerships, or home office resources – underscores a collaborative approach to financial advising. It is through these partnerships and tools that advisors can enhance their capabilities and focus on what truly matters – forging strong, trust-based relationships with their clients.
The path forward is clear: embrace personalization, leverage support, and focus on delivering value that resonates with clients' individual journeys. In doing so, advisors will not only foster deeper client relationships but also carve a niche for themselves in a competitive, ever-changing industry.
From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.
Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.
“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.
Sellers shift focus: It's not about succession anymore.
Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
