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Morningstar to help IFAs become behavioural coaches

Morningstar to help IFAs become behavioural coaches

Behavioural advice tools being developed by Morningstar could help IFA's clients achieve an extra 22 per cent investment growth in retirement, the rating's agency claimed.

Sarah Newcomb, a behavioural economist at Morningstar, is applying research to the creation of conversation techniques and decision trees which will be available over the next year for advisers. 

Part of the impetus is the belief that with computers now able to carry out asset allocation, advisers need to focus more on the human side of money management and act as behavioural coaches as well as financial advisers.

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Many of the techniques being developed are designed to help clients adopt longer time horizons. 

"My research shows that people who think at least 10 years ahead have 10 times more in retirement savings than those who think a year ahead or less," she says. 

They are also intended to help clients emotional well-being.

"Most IFAs will have at least one client who will never outlive their finances but they are filled with anxiety. You might call that person financially healthy but I would say they are not well," she said. 

Research by Morningstar Investment Management shows that advisers can give clients in retirement an extra 22 per cent in assets in return through such techniques. 

Ian Balgarnie, business development director at Ascot Lloyd, agreed IFAs could greater happiness for clients through such techniques.

"It comes back to how they behave when you talk to them about the options they have got," he said. 

"When I first joined the industry 35 years ago it was called objection handling and we need to get better understanding what underpins 'I do not want to do it at the moment' ".

Geoff Towers, chief executive of Pershing, highlighted the work advisers could do around the benefit of an extra year's employment for their clients. This would give the potential for another year's investment growth, contributions and a higher average income for the duration of their retirement. 

"That is a triple win for an individual," he said. "It is a hugely valuable piece of advice that is not obvious to end consumers. The challenge for us all in the industry is how do we get end consumers to be interested in this to take the first step."

david.rowley@ft.com