How the value of financial advice has changed since the pandemic

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Rob Grein knows firsthand how difficult it can be to put a specific number on the value of financial advice.

As president of PMG Intelligence in Waterloo, Ont., he and his team have spent years developing and refining a model for advisors to give clients an exact measure of the worth of their work.

Mr. Grein spoke with Globe Advisor about the challenges involved in creating PMG’s value of advice and predictive analytics model and how his firm’s data have shown COVID-19 is creating more opportunities for the financial services industry.

What challenges did you face when you were building this model?

The first roadblock that we ran into around 2014-15 was how to define financial success.

There was a feeling within the industry that financial success should mean assets – how much wealth someone has should be a definition of financial success.

When we tested the model against financial success being defined exclusively as the level of wealth, the number of statistically valid or significant relationships that were drawn was minimal, so we had to go back to the drawing board.

How did you end up defining financial success?

What we learned was it was not just assets. There’s also the rate of savings, the incidence of using an advisor, and the receptivity toward receiving advice.

When we combined those four elements together to form an index and then compare that against our big dataset, it was like watching a Christmas tree light up for the first time. We found relationships everywhere.

How did the pandemic change your analysis?

COVID-19 actually changed our world dramatically. Before the pandemic, we didn’t see a lot of change over time.

It was like watching a big cruise ship sail through the ocean, but then COVID-19 hit, and that cruise ship turned into a jet ski. Before, so many decisions were made on autopilot. Those 30,000 or so decisions that we make every day, we don’t even think about them, we don’t even blink, we just act.

Pre-COVID-19, if we could do one thing to help a consumer that would contribute to their financial success and health – helping them understand expense management – was the number one factor. That made sense.

What was really interesting about this model was in late 2021, deep into the pandemic, the whole thing changed. It marked this fundamental change in consumers wanting to understand how these things [financial/retirement planning] work. Consumers today get a little bit further into the weeds.

How can advisors find value from the change in clients?

Before COVID-19, if you were to ask an under 35-year-old, do you have a retirement plan? Usually, the response would be, “Yes, I have an [registered retirement savings plan],” even though that is not really a [retirement] plan.

Whereas today, those under 35 actually want to understand when they save this money, how do I get it back out? The engagement turned upside down.

The level of engagement that we see now as a result of the pandemic is going to affect financial service attrition rates.

The increased and growing relevance of the financial advisor and the role of advice is opening up some wonderful opportunities for financial institutions.

This interview has been edited and condensed.

– Jameson Berkow, Globe Advisor reporter

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What to know before agreeing to be an executor of a will

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Wealth management booms as the rich get richer but markets get choppy

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