Heads up, rollover experts. High-net-worth participants and clients want one thing more than anything else. According to new research from global analytics firm Cerulli Associates, high-net-worth (HNW) investors most frequently cite transparency as a “very important differentiating factor in an advice provider.”
“The first step in entering the HNW financial services market is understanding what characteristics these households desire in an advice provider,” Scott Smith, director at Cerulli, said in a statement. “When asked specifically about the elements they would seek in a new advisor relationship, across age tiers, HNW investors most frequently cite transparency as a very important differentiating feature.
“Helping investors understand the full extent of an advisor’s potential revenue streams has been a persistent challenge for both advice providers and advisors, and has become even more complicated with the ongoing evolution of integrated wealth management conglomerates,” Smith added.
While fees and expenses are well documented within the agreements and disclosures that investors sign, few take the time and effort to fully consider the cost of their arrangements.
“The financial industry was built around the premise that investors understand the fees they pay and sign documents affirming their awareness,” Smith concluded. “Cerulli’s research indicates that investors who truly comprehend the entirety of their costs are more the exception than the rule. The overall expenses of pooled investment vehicles, including management fees and other embedded fees such as 12b-1s, are essentially nonexistent to many investors-if they do not see a line item deduction from their accounts, they do not recognize a transfer of wealth from themselves to their advisor or provider.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
