OAKS, Pa., July 18, 2019 /PRNewswire/ -- New research
collected from surveys conducted by SEI (NASDAQ: SEIC) reveals that
advisors – not just investors – can be affected by behavioral
biases. Advisors ranked "overconfidence," the tendency to
overestimate their skills and accuracy, as the top behavior (26%)
that affects their decision-making, and "regret avoidance" comes in
at a close second (21%). Although advisors are aware of these
biases and others, opportunity exists to better manage these
behaviors in order to help deliver better results for clients.
"Advisors are human, too. Recognizing their own biases and
taking proactive steps to keep them in check will foster trust and
open dialogue with clients, which is essential to an advisor's
business success in any market environment," said John Anderson, Managing Director and Head of
Practice Management Solutions at Independent Advisor Solutions at
SEI.
Biases are just one aspect to consider in the advisor-client
relationship. In addition to differences in clients' and advisors'
expected behaviors during times of market volatility, the study
revealed disconnects in the perceptions and discussions around
risk. Risk profiling questions should be worded carefully to assess
the client's attitudes without introducing both advisor and
investor biases. Client perceptions of risk are often driven by
emotions and can be easily misunderstood or discounted by advisors
who typically take a strictly rational approach. Measuring risk can
be complex and not intuitive for most investors, highlighting a
discrepancy between how advisors and clients view risk.
"It's important for advisors to understand risk along two
dimensions: market risk and shortfall risk. By shifting the
client's focus from benchmark performance to what it means if they
cannot retire at 65 years old, the client and advisor can avoid
knee-jerk reactions to short-term market movements, and instead
focus on the end-game with full transparency," says J. Womack,
Managing Director of Investment Solutions at Independent Advisor
Solutions. "By implementing a goals-based wealth management
framework, these challenges can be overcome."
The research also showed that "goals-based" may be used too
liberally. A majority of advisors (59%) believe they are
implementing a goals-based framework, with nearly all (86%) stating
they align individual portfolios with individual goals. However,
more than half (52%) of advisors manage only one or two portfolios
per client, whereas a true goals-based wealth management approach
builds multiple portfolios – each aligning to an individual
goal.
In a true goals-based wealth management framework, traditional
advisor-driven wealth management is replaced with co-planning and
ongoing client-advisor engagement, supported by technology. Placing
the client at the center of the conversation with the advisor
serving as coach is vital, as research shows an average
150-basis-point positive impact on portfolio
performance1.
"Coaching Through Biases—Yours and Your Clients" covers the
study's full findings and offers steps for advisors to take in
implementing co-planning strategies and a full goals-based wealth
management approach.
Methodology
SEI Financial Advisor
Survey: Incorporated 608 responses from our 2019 SEI
Financial Advisor Survey, conducted in April
2019, to better understand how advisors assess risk
tolerance, align portfolios with client goals and help manage
client behavior.
Investor Survey: SEI, in partnership with Phoenix
Marketing International, surveyed 1,000 affluent U.S. households in
March 2019 to learn more about their
behavior in volatile markets. After filtering out self-directed
investors, analysis is based on 653 surveys, comprised of 143
emerging affluent households ($100,000 to $249,999 in investable assets); 337 mass affluent
households ($250,000 to $999,999 in investable assets); and 173
high-net-worth households ($1,000,000
to $4,999,999 in investable assets).
Phoenix Marketing International is not affiliated with SEI or its
subsidiaries.
1 The Value of Advice What Investors Think,
What Advisors Think, and How Everyone Can Get on the Same
Page
https://www.morningstar.com/lp/value-of-advice?cid=CON_ISP0029&utm_expid=.J-7qZGF7SB2a3RHZmxujaQ.0
About Independent Advisor Solutions by SEI
Independent Advisor Solutions by SEI provides independent financial
advisors with wealth management services through outsourced
investment strategies, administration and technology services, and
practice management programs. It is through these services that SEI
helps advisors save time, grow revenues, and differentiate
themselves in the market. With a history of financial strength,
stability, and transparency, Independent Advisor Solutions has been
serving the independent financial advisor market for more than 25
years, has 7,400 advisors who work with SEI, and $65.6 billion in advisors' assets under
management (as of March 31, 2019).
Independent Advisor Solutions is a strategic business unit of
SEI. For more information, visit seic.com/advisors.
About SEI's Asset Management Distribution Team
SEI's Asset Management Distribution Team provides customized
strategic partnerships that enable open-architecture investment
solutions aligned to end-investors' goals. The group supports
leading financial service intermediaries across the globe,
including North America,
Europe and Asia, and creates a distinct end-client
offering by implementing a goals-based advice framework that
combines SEI's pioneered behavioral finance approach with the
client's proprietary advice platform. SEI's Asset Management
Distribution Team is a part of the company's Private Banking
business unit. For more information, visit seic.com/amd.
About SEI
After 50 years in business, SEI (NASDAQ:
SEIC) remains a leading global provider of investment processing,
investment management, and investment operations solutions that
help corporations, financial institutions, financial advisors, and
ultra-high-net-worth families create and manage wealth. As of
March 31, 2019, through its
subsidiaries and partnerships in which the company has a
significant interest, SEI manages, advises or administers
$945 billion in hedge, private
equity, mutual fund and pooled or separately managed assets,
including $332 billion in assets
under management and $609 billion in
client assets under administration. For more information, visit
seic.com.
Company
Contact:
|
Media
Contact:
|
Leslie
Wojcik
|
Meredith
Mitchell
|
SEI
|
Prosek
Partners
|
+1
610-676-4191
|
+1
646-818-9268
|
lwojcik@seic.com
|
mmitchell@prosek.com
|
View original
content:http://www.prnewswire.com/news-releases/sei-study-uncovers-the-impact-of-advisor-biases-on-client-outcomes-300887270.html
SOURCE SEI