Redefining Adviser Value
By Shweta Agarwal, Ph.D & Henry Cobbe, CFA
Technological advancements and regulatory reforms are presenting new challenges to the
traditional financial advice profession. The streamlining of investment decision making is
giving investors the opportunity to exercise greater autonomy over their savings decisions
and execution. With many investment functions increasingly outsourced to asset allocation
funds and model portfolios, there is some concern that advisers find it harder to evidence
their value add in this more streamlined world.
In this white paper, we discuss how financial advisers can continue to play a vital role in the
lives of most investors particularly in the current context of regulatory and macroeconomic
uncertainty. We investigate how advisory functions interact with the two systems of cognitive
reasoning that underpin financial decisions and identify areas of this process which rely
heavily on human interaction. We argue that areas of financial decision making where clients
predominantly engage their emotional system are areas where advisers should focus on
enhancing the value they add. Advisers should leverage their expertise to add “emotional
value” by helping investors feel more confident and comfortable about their investment
decisions while other inherently “economic” tasks such as optimal portfolio construction, and
rebalancing may be better performed by asset allocation specialists.
This white paper provides a framework for discussion of the key constituents of an advisory
model that creates “emotional value” and sheds light on the characteristics that make
advisers successful from a customer and business perspective.
Key words: Behavioural finance, decision-making, financial adviser, client service
JEL Codes: G02, G11, G18