Your IndustryAug 14 2015

Advisers told to get emotional with clients

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Advisers told to get emotional with clients

Adding ‘emotional value’ is often more important to clients and more successful for advisers than adding economic value, according to the latest CPD paper from Birthstar.

Focusing on the value an adviser adds to client relationships in the context of technological changes in the industry, the latest in the target date fund specialist’s Rethinking Retirement series suggests IFAs develop and leverage their expertise to add ‘emotional value’ by helping investors feel more confident and comfortable about their investment decisions.

Authors Shweta Agarwal, head of behavioural insights, and Henry Cobbe, managing director and head of research at Birthstar, 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.

The paper makes the distinction between the advisory functions based on the cognitive systems of human reasoning clients engage with - those functions that have a high ‘emotional currency’ - as opposed to being inherently economic and procedural in nature - the former being better delivered through human interaction.

“Creating and delivering emotional value requires advisers to have strong interpersonal skills and emotional intelligence, both of which can be developed through training programs.”

Birthstar also makes a nuanced distinction between experts and advisers, noting that while advances in technology may take over the functions of an expert, the functions of advisers will continue to be better delivered through human channels, with face-to-face interaction likely to be valued by investors willing and able to pay for financial advice.

The document is the third in a series, following one focused on lifecycle investing with target date funds, released last month.

peter.walker@ft.com