Professional Adviser: How to balance investment flexibility with too much choice

To remain competitive, advisers must leverage technology to deliver a truly unique and personalised client experience, writes J. Womack

In today's investment landscape, personalisation is not a luxury—it's a necessity.

Standing out in an increasingly competitive market demands a keen focus on addressing each investor's distinct needs. However, the push for personalisation can create a maze of products and solutions, potentially overburdening both investors and advisers.

As the landscape continues to become more complex, advisers must balance providing a tailored, goals-based investment experience with the potential for overloading them with too much choice.

The drive for personalization

Influenced by both financial and non-financial dynamics, various forces are reshaping wealth management.

While concerns about interest-rate volatility, inflation, and equity volatility are what immediately come to mind when you think about the ‘market', it's equally—if not more important—to understand what's motivating investors and their advisers, as they're partnering to achieve those investors' long-term financial goals.

When exploring what motivates investors, advisers should consider three key factors.

Assign meaning to money: Personalisation trends are amplifying advisers' ability to connect their clients' life aspirations to their investment objectives. This holistic approach, focused on individuals' needs, helps to change the nature of the adviser/client relationship—evolving from general advice to a bespoke service to meet clients' exact requirements and marking a seismic shift in wealth management.

Make it easy: In today's market, advisers can meet their clients' expectations and increasing fee sensitivity through simplicity. To combat this pressure, many advisers are shifting their value proposition and delivering more services to help their firms grow and scale. As a result, firms are increasingly looking to outsource investments to focus on growth through holistic advice. This is driving explosive growth in the number of available models in the market, leading to an increased level of flexibility for advisers, but also adding complexity. For asset managers, it's no longer about products alone: It's a shift to delivering solutions supported by insights.

Tax efficiency: The market's performance has led to outflows in mutual funds and an increase in flows to ETFs, causing a $1.5trn gap in the flow of assets between the investment vehicles—the largest divide experienced by the markets. While investors have been abandoning classic vehicles for years due to the tax-friendly structure of ETFs, recent rate hikes and market volatility have expedited the disparity. As a result, investors are increasingly interested in strategies that help them keep more of what they earn, triggering advisers to seek more tax-efficient implementations within their clients' portfolios—a trend expected to accelerate.

A hyper-personalised advice model that reduces complexity and demonstrates alignment with personal values and financial preferences will be foundational to supporting these client motivations. Advisers must, above all, be advice-led and determine the experience they want to deliver for their clients in order to get the balance right.

Coaching clients through the 'paradox of choice'

The current market challenges, combined with a wide range of product options, present a daunting task of choosing the right product at the right time for both advisers and investors.

This 'paradox of choice' offers a prime opportunity for advisers to help deliver value and coach their clients. The key lies in clearly articulating how a client's portfolio components align with their financial goals, navigating clients through the sea of choice, and recommending a suitable path with the client's outcome at its core.

Finally, advisers must have a clear understanding of what their clients own and implement their strategies in a model-based way for consistency that enables scaled advice delivery across their books of business.

By focusing on these areas, advisers can help their clients meet long-term goals, and ultimately, help improve their financial wellbeing.

What does the future hold?

As the desire for personalisation reaches all client segments, quality financial planning, targeted portfolio implementation, and highly personalised reporting tailored to a client's specific needs will be pivotal to guiding clients through the choice paradox to help them achieve their goals.

Advisers must leverage technology to scale the delivery of more sophisticated advice that introduces complexity to portfolio construction, ongoing portfolio management, and meaningful client reporting.

To remain competitive, advisers must leverage technology to deliver a truly unique and personalised client experience. Those who master this balancing act can reap the rewards of rapid growth and be best positioned to dominate the market in the years to come.

This article first appeared on Professional Adviser.

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$1.5trn gap in the flow of assets between mutual funds and ETFs sourced to Bloomberg. 

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