The importance of the fiduciary standard in advice has been reiterated following new research from the financial services company.
The new white paper co-authored by Morningstar Investment Management global head of behavioural insights Ryan Murphy, which looked at the adviser-client relationship and what makes someone trust a financial adviser, outlined that “the best-interest standard is paramount”.
“One attribute clearly rises above the rest: ‘When my adviser acts in my best interest.’ The overwhelming support for this attribute reiterates the importance of the fiduciary standard in advising,” the paper read.
Morningstar said it found that “trust, delegation and recommendations” came from cognitive-based actions, such as expertise and communication over affective-based actions such as concern and integrity.
“Our findings indicate that a person’s willingness to trust, delegate, and recommend an adviser likely has the same underlying drivers, as evident by the similarities between the average ranking of attributes,” Morningstar said.
“We find a strong correlation between frequency of communication and the recommendation measure, signalling the importance of advisers staying top-of-mind with their clients.
The paper concluded: “As financial advisers engage with individual investors, they must remember that individuals may be coming from a low level of general trust at the industry level.
“At the same time, as other studies have also demonstrated, our results show that trust is critically important in the advisor-client relationship as a way for advisors to be effective and grow their business.”
Morningstar’s paper comes after Midwinter’s head of advice sales, Stacey Cowan, urged financial advisers and business owners to start considering how to maintain strong relationships with their clients coming out of the COVID-19 pandemic.
On a recent episode of the ifa Show podcast, Ms Cowan said many clients will want a virtual relationship with their adviser to continue.
“… I think we know remote work and all the benefits that come with remote work are likely here to stay in some form or another,” she said.
“So the question then becomes, as an adviser or an advice business owner, what do you want to do in terms of connecting with your clients?”
Listen to the full podcast with Ms Cowan here.
NONE of my clients have chosen to have an ongoing virtual connection “”Service””. My ‘older’ clients found it amusing but not something they want going forward and the majority look forward to the ‘face to face’ meetings. Obviously not always possible with the larger client bases.