New research from Morningstar, a global independent investment research firm, uncovers an unexpected twist in our understanding of why individuals hire financial advisors. Instead of focusing purely on monetary matters, the study reveals an interesting blend of emotional factors at play.
Morningstar's research is based on the responses from three comprehensive surveys conducted during 2021 and 2022. Over 3,000 participants responded from the comfort of their homes, mitigating any potential social bias. The participants included a subset of around 623 individuals (21% of the respondents) who were currently working with a financial advisor.
Not Just About Finance
Approximately one third of Americans are engaged with a financial advisor, despite 62% acknowledging the need for better financial planning. These figures illustrate a significant group of individuals who could gain from financial planning services but are currently not utilizing them. So, what motivates individuals to hire advisors in the first place?
Going against traditional beliefs, the Morningstar study brings out the fact that people don't just engage financial advisors for addressing specific financial needs. Emotional considerations often play a critical role in the decision to hire an advisor.
Factors such as the client's comfort level with handling financial matters, the nature of the relationship with the advisor, and the advisor's role in facilitating decision-making turned out to be crucial. This suggests that an advisor's role isn't confined to addressing financial needs but extends to providing emotional support and behavioral coaching.
The Silent Emotional Need
Interestingly, clients often don't express their emotional needs when seeking financial advice. The study suggests that clients benefit from financial advisors proactively identifying and catering to these silent emotional requirements.
The study suggests that a significant portion of individuals might not recognize their emotional needs or might be hesitant to express them. By adopting language that resonates with clients, drawing parallels from everyday financial scenarios, and emphasizing prevalent financial worries, advisors can better illustrate the emotional assistance they're equipped to provide. This approach not only addresses unspoken emotional needs but also reinforces the pivotal role that advisors can play in clients' financial well-being beyond mere monetary guidance.
The study highlights something that we recognized a long time ago: the relationship we share with our clients is multi-faceted and extends beyond financial and technical decision making. Making better financial decisions has the potential to improve lives and provide peace of mind. Getting to the heart of what motivates these life decisions is something that can only be accomplished through ongoing communication and relationship building. While we pride ourselves on our quantitative abilities, it is our qualitative side that often creates a bigger impact.
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