interact with these two systems. Building on an in-depth study of adviser qualities valued by
clients,1 we identify that the key quality advisory models that are most valued by clients—
interpersonal skills—leverage the emotional intelligence of advisers. We offer an in-depth
discussion of how emotional intelligence can assist client engagement and job performance.
Our view is that where System 2 dominates it may be possible to outsource most aspects of
financial decision making to automated systems or technology specialists. By contrast,
where System 1 dominates, human engagement remains essential to the decision making
process. We formalise this view through a distinction between adding “economic value”
(engaging with System 2) and adding “emotional value” (engaging with System 1). For the
advisory model this means that rather than focusing on adding “economic value” i.e.
delivering superior investment returns through sophisticated strategies, advisers must
leverage their expertise to add “emotional value” by helping investors feel more confident
about their investment decisions and guiding them through a disciplined and positive
investment journey experience.
The adviser struggle to retain value
Although traditional concepts of adviser value are being challenged by new
technological advancements and regulatory reforms, human interaction will
be necessary to overcome emotional investment barriers.
Traditionally, financial advisers have offered a range of services to help clients better
manage their money. These services include researching the market on the range of
investment products available, sorting product types broadly based on client types,
explaining various attributes of the products, helping clients understand their investment
objectives, constructing portfolios and monitoring the portfolio to best meet their goals. New
trends in the financial services industry however are are posing threats to the traditional
advisory model and the value that advisers add.
One major change is the emergence of innovative technology applied to financial services
(‘FinTech’). This has made it possible for many of the services that were performed by
advisers to be outsourced to electronic channels. Examples of such services range from
simple everyday transactions such as payments and mobile banking to more involved
investment research platforms and planning tools for savings decisions. Traditional portfolio
construction can now be replaced by managed funds or portfolios which are designed to
offer a managed investment journey at low fees. This means that advisers are focusing
increasingly on financial planning and selecting suitable asset allocation strategies to match
their client’s goals.
Another change, more recent to the industry, is the UK regulatory reforms introduced by the
Retail Distribution Review in December 2012. These changes now demand that advisers
have suitable qualifications and training, complete disclosure of the type of advice offered
(independent/ restricted) and greater transparency on the fee structure. Consequently many
older advisers exited the market completely in the lead up to RDR and many advisory firms
are now either restricting the provider they use or the range of products that they offer