Emotional Needs Outweigh Financial for People Working With FAs

People who choose to work with a financial adviser are more likely to do so for general emotional reasons than specific financial needs, according to new research from financial services firm Morningstar Inc.

In research released Tuesday, among 312 people who use financial advisers, 60% of respondents listed areas related to emotional needs as their reasons for working with an adviser, as compared to 40% who noted strictly financial needs, according to researchers Danielle Labotka and Samantha Lamas.

“We found clients hired their advisor not just because they were looking for assistance with a specific financial problem,” they wrote in the report. “This suggests that although financial issues certainly are a common driver of client hiring decisions, there is an additional thread of emotional drivers—like the degree to which someone feels comfortable making financial decisions and their ability to stay the course.”

As workplace retirement plan advisories, as well as recordkeepers, look for ways to engage plan participants, the new research may show that engaging participants at an emotional and behavioral level may be equally, or even more important, than focusing on a specific financial need.

Among those surveyed by Morningstar in 2002 and 2001, 32% listed their need for a financial adviser as related to discomfort in handling financial issues (32%), with an equal amount saying they were seeking help with a specific financial need (32%). Among those citing discomfort, the respondents were seeking understanding and confidence in their financial security and to have an expert make their financial decisions. For those with specific financial needs, reasons included starting out with investing, setting up an annuity and making sure they are on track for retirement.

The remaining respondents cited emotional-linked needs, with 17% seeking behavioral coaching from their adviser, 12% citing a recommendation from friends or family and 10% citing the positive relationship with their adviser, according to the report.

“Overall, we found people chose their financial advisor for numerous reasons—not just to help with a specific financial issue,” Labotka and Lamas wrote. “These findings suggest it is important for advisors to lead with their ability to provide both financial and emotional support when courting new clients.”

The findings stand true for advisers in seeking new clients as well, according to the researchers.

“New clients may not always be willing or able to express the emotional needs they are hoping a financial advisor can meet when seeking one out,” the researchers noted. “Advisors can address these emotional drivers by demonstrating to prospective clients the ways in which they can address both financial and emotional concerns in a research-backed way.”