Elston CPD Redefining Adviser Value - Page 3

Abstract 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 SSRN 2616138 3