The advice profession is moving away from asset allocation being the most important part of the job, according to Ryan Murphy, global head of behavioural insights at Morningstar.
Murphy leads a team of 10 people based around the world who work on projects studying how people make decisions about risk and investing.
He said the key to a good outcome is to look at what motivates people to make investment choices.
“When you ask a person about their 30-year financial aspirations people, to some degree, aren’t aware, they don’t know.
“Advisers are put in the unenviable position of speaking to clients about something they should know about but don't know.”
One of the results of a year-long process was coming up with three prompts advisers can use to get their clients to understand what their financial goals are.
Murphy said: “Advisers’ jobs are becoming less about investment management and more about investor management.
“Their job has evolved to take on more of the soft skills.”
The process starts with a client listing their top three financial goals.
In the next step, the adviser presents the client with a list of common financial goals and asks which of these are important to them but are missing from their initial top three.
The final step sees the client consider both versions of the list and creating a final list of goals.
Murphy said at the end of this process around three quarters change their top three priorities.
“The thing about this simple process is that people are delighted; they don’t feel they are stupid but rather they have learnt something and that is huge,” said Murphy.
Adviser shift
Overall, Murphy said there has been a shift in the way advisers work.
He added: “The industry is evolving.
“There is a realisation that the first thing you think about should not be asset allocation, it should be about goals.
“This is the proper way to think about what financial guidance is and should be.”
As for what is next on the cards for the behavioural insights team, Murphy said advisers are a great source of inspiration as is new literature coming from academia.
tara.o'connor@ft.com
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