Affluent investors are more reliant on advisors than ever before, according to a new report by Cerulli Associates.
The research and consulting firm found that among affluent investors — individuals with more than $250,000 in investable assets or $100,000 for those under the age of 45 — there was a growing appetite for financial advice and a willingness to pay for it.
“People want more advice. They realize that doing it themselves is kind of an uphill battle that they don’t want to spend their time on,” said Scott Smith, a director at Cerulli. “People know what they’re not good at and they’d rather spend some money rather than trying to figure it out for themselves, especially on something as complicated as investing.”
According to the company, advisor-reliant investors grew from 36 percent of the affluent last year to 44 percent. Cerulli defines advisor-reliant as investors with conservative risk tolerance, a perceived value in formal financial planning, little to no involvement in finances, who prefer advisor discretion, and who are reluctant adopters of digital engagement. Investors willing to pay for advice also grew from 36 percent in 2009 to 64 percent this year.
Cerulli polled about 6,000 affluent investors between the first and second quarters of 2023.
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Compared to all advisory channels, independent advisors had the highest number of advisor-reliant investors with 66 percent, followed by wirehouses at 63 percent. Affluent investors within this category ranked access to customized investment solutions as a key reason for turning to an advisor.
Overall, investors with investable assets between $500,000 and $2 million made up the largest category of advisor-reliant investors, but Cerulli believes that demand for holistic advice is a growing trend that will continue to increase.
About 55 percent of advised assets now reside within fiduciary advisory accounts, up more than 20 percentage points from the 34 percent recorded in 2011, according to Cerulli. “Investors have chosen to move away from transactional brokerage relationships in favor of long-term advice relationships,” wrote Cerulli.
Seventeen percent of all affluent investors are advice-seekers — individuals who are highly optimistic and open to new investment options, the most willing to pay for advice, seeking to balance portfolio involvement and guidance, willing to cede discretion, and prefer high advisor engagement.
“These are the people who are going to be looking for advisors now and who will be their bread-and-butter clients over the next 30 years,” Smith said. “Serving them is about making sure you have a service offering that can provide comprehensive advice to the younger investors and is scalable.”
“For advisor-reliant investors, it’s about strengthening the relationship on a personal basis. Make sure you know what’s going on in their life and their partner’s life. And then simplify their finances in any way you can. One of the things we addressed in the report is that people are looking to have fewer providers and kind of consolidate their assets,” said Smith.
About 57 percent of investors said they would prefer to use a single institution for the bulk of their financial needs. However, just 25 percent of those with this preference said they used one institution. Cerulli said this is often because of limited offerings or the challenges in consolidating assets.
“If clients have to go somewhere else for life insurance, it’s very possible that that life insurance provider also has investment accounts. And if they’re being given great service on the life insurance side it is possible that you could lose the investment account. So, broadening that scope of service to have many areas of engagement with the client can help strengthen those advisor-reliant relationships,” said Smith.