In reaction to fee awareness, advisors focus on client experience to capture assets
April 2019, Boston—Perception of value is in flux in the financial advice ecosystem, as advisors juggle an increasingly digital, low-cost, and fee-transparent landscape. Advisors and their firms are tasked with justifying how they add value
as investors become more discerning about their fees, according to research from Cerulli Associates, a global research
and consulting firm. To remain competitive, advisors must evolve their definition of advice to include nonfinancial aspects of the client’s life and curate a meaningful experiential process for their clients.
The percentage of investors who believe that their advice is either free or are unsure how they pay for advice has fallen from 65% in 2011 to 42% in 2018. Advisors also report heightened fee sensitivity from their clients. Close to threequarters
of advisors agree or strongly agree that, compared with five years ago, prospective clients are now more sensitive about fee levels.
“Despite growing fee awareness, willingness to pay for advice has increased,” says Marina Shtyrkov, research analyst at Cerulli. As of 2Q 2018, 53% of investors agree that they are willing to pay for advice regarding their financial investments, representing a 15-percentage-point increase from 2009, when only 38% of investors expressed such willingness. Overall, 76% of investors agree or strongly agree that the value they receive from financial advisors is worth the expense. “While clients understand that advice comes at a cost and many believe it is worth its expense, if the cost-benefit of engaging with an advisor is not clear, they are more likely to opt for other providers,” Shtyrkov adds.
According to the majority of retail investors, transparency (73%), understanding of needs and goals (67%), and promptness of requested follow-ups (66%) are paramount to advisory relationship satisfaction. “Notably, according to
satisfied investors, an advisor’s integrity and the overall relationship outweigh expertise or investment performance,” explains Shtyrkov. “Although acumen and investment performance are valuable, practices that emphasize only these elements may be misaligned with the true drivers of investor satisfaction.”
Of all advisors surveyed, only 30% strongly agree that their practice goes above and beyond to make clients feel special, and that it has a repeatable, consistent client experience. “Experience-centric practices exhibit stronger results than their peers across a series of metrics, including a higher median client size, lower asset attrition, a broader service set, and greater likelihood to target affluent clients,” continues Shtyrkov. “By outpacing their peers in these categories, experience-centric practices demonstrate that advisors can harness the power of their client experience to increase retention, reduce attrition, and generate a strong referral system.”
These findings and more are from the April 2019 issue of The Cerulli Edge—U.S. Asset and Wealth Management Edition, which explores how client-centric advisors, mega teams, and digital marketing are key conduits for financial services providers in reaching their key clients.
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