There is a mega-trend happening in the advisory space, and judging from the responses to joint research from the Money Management Institute (MMI) and Aon, advisors do not seem to be catching on as quickly as they should.

That mega-trend, explains Craig Pfeiffer, president, and CEO of MMI, is around engaging holistically based on a financial plan that integrates value. “Clients want to talk about their values, and they want to integrate their values into their financial decisions, and advisors want to do so in the old context,” he said.

The traditional advisors’ role has been focused on portfolio construction and portfolio management, but investors’ lives have become more complicated and more sophisticated, Pfeiffer said. “At a high level, it’s really about advisors becoming relationship managers from being portfolio managers."

The report, "Harnessing Generational Differences Across the Financial Planning Process," is the second release in a four-part MMI and Aon research endeavor titled, "The Advisory Solutions: Expectations and Experiences." It examines gaps between investor perceptions and firms' delivery that continue to challenge the wealth management industry and inhibit client value. The recent survey, which was conducted between December 2019 and January, included 1,500 wealthy individuals and mass-affluent investors with more than $250,000 in investible assets, as well as 1,077 financial advisors across the U.S.

One of the more glaring gaps revealed in the research was advisors’ perception of clients’ satisfaction. Most investors (77%) indicated they wanted their advisors to ensure that their investment strategy is aligned with personal values, while only 44% advisors believed their clients do. The gap was more visible for younger investors—defined in the research as those under 45 —of whom 91% seek alignment with their personal values and investment strategy.

Not surprisingly, the research found that satisfaction scores are higher for those who do discuss personal values with their financial advisor and have those values reflected in their investments. For financial planning, the score is 75% versus 57% for those who do not have that discussion with their advisor; and for overall relationship, the score is 78% versus 66%.

Young investors, as pointed out by David Lo, assistant partner and head of U.S. Client Insight at Aon, are particularly not satisfied with the overall financial planning experience with their advisors. “There is a disconnect there that we see in the data," he said. "Certainly, you can attribute some of that to the desire to talk about their values and the lack thereof that we have seen to date.” 

Based on Part 1 of the MMI and Aon research, younger clients placed greater importance on social and environmental causes such as human rights (49%), diversity and inclusion (23%) and corporate governance (15%). Older clients appeared more patriotic (49%) and religious (32%).

And though young clients were more likely than their peers to report having had a financial planning discussion in the past 12 months, 49% remained less satisfied with the financial planning. In fact, the research showed that 36% gave their financial advisor or team average-to-low marks, compared to 29% of those over 55.

“Adding that additional value to that conversation certainly would create a much more memorable and compelling experience,” Lo said.

Pfeiffer added that younger investors want financial guidance, but they are looking for advice beyond investment advice. The key question for advisors, he said, is whether clients know what you are talking about when you are talking to them, and are you using those emotional intelligence (EQ) skills and engagement skills that may connect those dots?

The research further explained that the dissatisfaction level among younger clients might be because they reach out to advisors following a broader range of events and, as a result, receive a more varied and perhaps less consistent financial planning service. For example, it noted that 30% of younger clients contact an advisor after a pay raise, more than twice the percentage of clients overall; and a third reach out seeking help managing a trust.

When asked what is most important when selecting an advisor, both advisors and clients strongly agreed on financial planning expertise. However, advisors significantly overestimated the importance of age and gender. On a scale of one to 10, advisors gave a rating of 7 to the importance of age compared to a 4.5 rating from clients. As for importance of gender in an advisor/client relationship, advisors rated it 6.5 versus 3.5 for clients.

Lo views this as positive. “It certainly suggests there is more of a level playing field, so long as you do have that EQ and you focus on it, it doesn’t matter much that you might these generational gaps,” he said.

Additionally, the research noted that wealthy investors who have an excellent financial planning experience reported higher satisfaction and hold a higher share of wallet with their wealth manager. Overall satisfaction is 94% and share of wallet 70% among those who said their experience has been excellent. When the financial planning experience is not so good, overall satisfaction plummets to 32% and share of wallet 61%.

Researchers concluded that firms need to create a process to help advisors more clearly define what constitutes a financial planning conversation, and to include actions such as recording and reporting to clients the myriad of informal conversations that take place in between formal reviews.