Do clients want financial planners to adopt a coaching approach?

The answer seems to depend on how the question is asked

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I do a lot of work with financial planners who wish to adopt a coaching approach in their engagement with clients. Much of this time is spent on developing the skills to ask clients meaningful and appropriate questions.

But Morningstar research in 2018 found that clients do not value a coaching approach. In the research, clients were asked to rank 15 benefits of working with a financial advisor. Top of the list was “helps me reach my financial goals”, followed by “can help me maximise my returns” and “have the relevant skills and knowledge”. In the bottom third of the list were “acts as a coach/mentor to keep me on track” and “helps me avoid behavioural mistakes”, suggesting that a coaching approach was not valued by clients.

clients are arguably expressing the need for a coaching approach, the core of which is to help clients find their own answers to their own questions.

Morningstar’s 2018 research presented a dilemma to financial planners: is there any point in adopting a coaching approach if clients don’t value it? This was particularly pertinent to me, as in 2018 I was involved, on behalf of Allan Gray, in developing and facilitating the first behavioural coaching programme for financial planners in South Africa.

In contrast to Morningstar’s findings, Vanguard (2016) and Russell Investments (2021) quantified that half the value of a financial advisor was in behavioural coaching.

Roll onto 2024 and Morningstar again asked investors to rank what they valued about financial advisors. The top three benefits were the same and the coaching-related items remained in the bottom third. While some experts are advocating for a coaching approach to financial planning, the clients are saying they don’t need it. How does one handle this disconnect? Morningstar has explored the disconnect in two separate studies.

In 2021 and 2022, Morningstar surveyed clients to give reasons why they hired or have an advisor. In this way, they got clients to express what they value in an advisor in their own words, which Morningstar suggests describes the “root of what clients value in a financial advisor”.

Four terms dominated the responses. “Getting comfort handling their finances,” and “behavioural coaching” related to a coaching approach. Technical expertise was also valued, with “quality financial advice” and “help with specific financial problems” the other two most common terms clients used.

In a 2024 study, instead of getting clients to rank a list of benefits, the researchers asked clients what they would be “willing to pay” for a particular advisory service. In response, the most valued service was “to help brainstorm and identify financial goals”, followed by “to help review your existing accounts and financial behaviour and provide personalised recommendations”.

Rob Macdonald, Head of Strategic Advisory Services, Fundhouse
Rob Macdonald, Head of Strategic Advisory Services, Fundhouse

By responding to a different question, what clients value most shifted from achieving goals to getting help to generate goals. In acknowledging advisors can help them do this, clients are arguably expressing the need for a coaching approach, the core of which is to help clients find their own answers to their own questions. Similarly, asking for a review of “financial behaviour” sits in the coaching domain. This “willingness to pay” study showed that aspects of a coaching approach are significantly more valued than when using the “ranking of benefits” methodology. It also reiterated the importance of an advisor’s technical expertise, with “evaluates research on investment options” third on the “willingness to pay” scale.

Morningstar’s multi-pronged approach to their research suggests that the way we ask questions matters, a core premise of the coaching approach. Clients ranking benefits versus describing what they value in their own words or expressing a willingness to pay produced very different results. Despite the apparent contradictions, it would seem the research confirms that clients value a coaching approach balanced with a financial planner’s technical expertise. 


References

Kinniry, Francis M., Jr., Colleen M. Jaconetti, Michael A. DiJoseph, Yan Zilbering, and Donald G. Bennyhoff, Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha®. Valley Forge, Pa.: The Vanguard Group, 2016.

Lamas, Samantha; Labotka, Danielle; and Murphy Ryan O., Understanding What Investors Value in a Financial Advisor, Morningstar Behavioural Research Insights, August 2024.

Russel Investments, 2021 Value of an Advisor Study.

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