The Value of Advice

We believe obtaining quality financial advice from financial advisors is more important today than ever. But why? What is the value of financial advice? Numerous studies aim to quantify the value delivered by financial advisors. For our purposes, let's break this down into a simple model that can be used articulate or reinforce the value financial advisors provide to their clients.

The total value of financial advice can be thought of as an equation, with each component magnifying the other to produce value. One component in the equation is being financially secure, and the other is feeling financially secure. Let's dig deeper into this concept. 

The Value of Financial Advice

What does it mean to be financially secure?

Financial security is a collection of items including returns, savings, planning, tax-minimization, etc. Said another way, it’s the numbers. Findings from a report prepared by the Investment Funds Institute of Canada (IFIC) suggest that “a financial advisor can boost a saver’s retirement savings by as much as 60% and retirement consumption by as much as 25%” 1. This is just one of the many quantifiable benefits a financial advisor can provide to help clients navigate their finances to meet current and ongoing financial needs.

Research also suggests that financial advisors can contribute immensely to the client’s bottom line. A report by the research centre CIRANO found the average household that worked with a financial advisor for 15 years or more had asset values 131% higher than an average “comparable” household without a financial advisor2. This is why the first part of our value equation is all about helping the client to be financially secure.

What does it mean to feel financially secure?

Feeling financially secure includes emotions, feelings, reactions, and biases. This is an often-overlooked part of the value that a financial advisor can provide. However, if your client doesn’t feel financially secure, this can impact their ability to make good choices and they may feel worried about their financial situation.

A survey by BlackRock looking at the relationship between wealth and well-being found that 76% of investors who use a financial advisor reported a positive sense of well-being.3 For this reason, the second portion of the value equation is centered around helping your client to feel financially secure.

Both components that make up this equation are important. If the numbers aren't taken care of through necessary financial planning, then value hasn't been provided. On the flip side, if the mindset hasn't been looked after, there could always be fears that could lead to unnecessary risk-taking or extreme caution. Again, reducing or reversing any potential value.

Today in a challenging market environment, the focus tends to go toward the numbers. Yes, you want to use this time to verify the being financially secure part of the equation, but don't be too one-sided in your approach. These times are often a missed opportunity to enhance your clients’ feeling of security. In good markets and bad, communicating regularly with clients strengthens your value.

For example, a survey by the Financial Planning Standards Council found that “Canadians who engage in comprehensive financial planning report significantly higher levels of financial and emotional well-being than those who do no planning or limited planning.”4 This approach covers both components in our equation.

How to keep your clients feeling financially secure

When the financial headlines are scary, and things are uncertain, it’s important to take the opportunity to engage your clients and prospects. Here's a guide on how to approach your conversations with clients during market volatility, and help them focus on feeling financially secure:

Acknowledge that it's scary, and that's okay. That you don’t have all the answers, but that you are happy to share what you do know.  

Remind them of the plan. Explain that you've looked over their situation, and they are okay and still on track.  

Ask them if anything has anything changed in their situation that might change the plan. Make sure that you answer any questions they may have.

Reinforce by walking them through some of the resources you’ve gathered.

Remember, use the model. Remind your client of the numbers and planning to help reiterate the ‘being financially secure.’ Then, use the empathy and the questions to help reinforce the ‘feeling financially secure.’

If you are looking for some positioning for these conversations, here’s an example you can customize for your voice:

"Hi "x" the reason for the call today is about all the financial headlines you might have seen in the news. These headlines can stir up a lot of emotions, so I wanted to check in on how you're feeling. I also wanted to let you know that I've reviewed your situation and, you're okay. You're on track for (insert their top goals). There is a lot of noise right now, and my job is to help you achieve financial well-being. Part of that is ensuring you are financially secure. The second part is helping you feel financially secure so you can enjoy your life and know you are well taken care of. That's why I wanted to call, to answer any questions but most importantly to cut through the noise and let you know you're okay."

It's a powerful conversation with your clients and a simple way to reinforce your value.

Market corrections are scary for everyone, regardless of how well you are prepared going into them. We need to remember that the markets are just part of the puzzle. There are countless other things that may be worrying clients. Regardless, communicating with clients, especially in scary markets, is a way to reinforce the value you provide.

For more considerations for communicating with clients in volatile markets, listen to our recent podcast, Consulting Insights, or reach out to your CI sales team. 

Source: IFIC and Conference Board of Canada 2020.

Source: Claude Montmarquette & Alexandre Prud'homme, 2020. "More on the Value of Financial Advisors," CIRANO Project Reports 2020rp-04, CIRANO.

Source: BlackRock Global Investor Pulse, 2019

Source: FPSC: The value of financial planning 

About the Author

Ryan Becker

Blog author
CI Global Asset Management

Ryan is responsible for the digital delivery of insightful and implementable content for the advisor community. He also consults directly with advisors regarding their unique needs delivering strategies that match needs to outcomes. He leverages many years of industry experience across the asset management world managing teams and projects in the back and front office. He is incredibly passionate about practice management and coaching. He received B.Comm (Honours) from the University of Guelph and is also a Chartered Investment Manager.