Investors’ Willingness to Engage in Paid Advice Relationships Is Peaking

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Investors’ Willingness to Engage in Paid Advice Relationships Is Peaking

Advisory fee levels are predicted to remain unchanged despite persistent cost pressure on underlying investments

October 2020, BOSTON—Despite seemingly continuous warnings about the pricing pressure in the wealth management space, investors’ willingness to engage in paid advice relationships has increased. Cerulli’s latest research, U.S. Retail Investor Advice Relationships 2020: Accentuating the Value of Advice, indicates that 82% of advisor-reliant clients believe the advice they are receiving is worth the price. Moving forward, Cerulli expects the costs of underlying investments to continue to decrease while advisory fee levels remain more resistant to erosion.

Demand for financial advice is climbing. A full 40% of investors surveyed in 2020 say they need more advice than before and 56% are willing to pay for it—up from 51% in 2019. “Current conditions have created a nearly perfect environment to expand the role of truly comprehensive financial advice relationships,” according to Scott Smith, director. “Investors are weary from the ongoing pandemic and pursuant economic challenges and are willing to engage in paid advice relationships.”

More than ever, advisors are proving their value. Increases in satisfaction during the uncertainty brought on by 2020, paired with very small increases in dissent, suggest that investors are content with their advice relationships, and that the quality of advice has remained high. Overall, 80% of investors express satisfaction with their current advisor, and just 1% indicate dissatisfaction. Clients report high satisfaction in their relationships based on transparency, honesty, and dependability of their advisors. “By keeping clients abreast of market developments, while also lending a crucial empathetic ear, advisors reinforce their importance to clients and the value inherent in personalized advice relationships,” suggests Smith.

The seamless connection of human and digital resources represents the next crucial step in the evolution of financial advice. By adopting the digital tools available to them and incrementally leading clients through a comprehensive planning engagement, advisors can allow clients to choose to offload their financial responsibilities at a comfortable pace, resulting in client-centered advisory relationships.

Furthermore, digital tools such as data aggregation, artificial intelligence, and client portal technology have the potential to differentiate the client experience, while striking the right balance between simplicity and sophistication of analysis; however, enterprise scale will be a challenge for providers to overcome. “To become a leader in next-generation advice, platform providers must ensure that their starting point is a client experience that tracks a path of least resistance through which incremental elements can be added based on client demand,” concludes Smith.

 

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NOTES TO EDITORS:

These findings and more are from The Cerulli Report—U.S. Retail Investor Advice Relationships 2020: Accentuating the Value of Advice.

 

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