Like clockwork, do-it-yourselfers panic in down-markets and look to you to fix it. And now a new report from Cerulli Associates confirms that, over the past nine years, more investors and plan participants have sought better advice, and are willing to pay for it. Purely a coincidence that nine years puts us back to 2008, and the worst market crash since the Great Depression.
“In 2008, 40 percent of respondents indicated that they were interested in paying for advice; by 3Q 2016, the percent grew to 50 percent,” Scott Smith, director at the Boston-based research and consulting firm, said in a statement. “We have found a high correlation with investor wealth, and a less robust inverse correlation with investor age. Investors under age 40 express the greatest keenness to pay for financial advice.”
“Investors express an increased interest in paying for the financial advice they receive,” Smith explained. “However, the market has yet to fully embrace their preferences or expectations.” To capture market share, providers will need to better understand investor preferences about their relationships.
With the rapid growth of digital retailers, traditional wealth management providers must assess the vulnerability of their business models.
“Digital options have become part of the landscape but consumers facing complex decision processes repeatedly choose to include humans in their service selections,” Smith added. “A belief in the trustworthiness and expertise of providers is a crucial element of these relationships.”
Traditional advisory firms need to deliver value in their advice relationships in order to compete with digital advice providers.
“The rise of digital advice shows that investors are frustrated by the current state of financial advice,” Smith concluded.
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.
