Study: Affluent Investors Growing More Reliant on Advisors
A recent report by Cerulli Associates suggests that affluent investors are “increasingly becoming more reliant on their financial advisors.”
Cerulli says it anticipates the demand for holistic advice will continue to “increase as investors seek to ensure that they are making the most of their efforts to pursue their financial goals,” according to The Cerulli Report—U.S. Retail Investor Advice Relationships 2023.
Currently, Cerulli estimates U.S. investors account for more than $55 trillion in total financial assets, down from $65 trillion a year earlier while also knocking roughly 300,000 households out of the high-net-worth population. Though nonfinancial assets continue to tick upward due to housing market growth, this has also slowed as high interest rates weigh on the demand for housing.
As the mass affluent grow increasingly focused on asset preservation, Cerulli’s research has documented an increased appetite for financial advice as well as a willingness to pay for it. Over the past year, Cerulli reports that the “advisor-reliant” cohort of investors has exhibited notable growth, increasing from 36% to 41% of affluent investors as self-directed investors and advice seekers look to connect with trusted advisors.
Affluent investors within the advisor-reliant category consistently rank access to customized investment solutions (67%) as a key reason for turning to an advisor. The research says managed account sponsors are responding to this need with 62% placing a strategic priority on personalization tools. Creating asset allocations matching investors’ risk tolerances and timelines has long been the core element of personalized portfolios and the ongoing evolution of wealth managers’ technology stacks is “making it much easier for advisors to take this personalization element to the individual security level.”
“Affluent investors are passionate about making sure that their advisors are offering solutions customized to their needs and goals,” says Scott Smith, director. “To align themselves with these priorities, advisors must dedicate themselves to understanding the circumstances, preferences, and goals of each client household at least as much as they do to researching the product solutions they offer to reach them.”
For households that do not work with an advisor, 46% have concerns regarding the lack of transparency around cost and method payment. However, 34% are not sure whether or not the advisor is recommending the best products for them. In connection, 28% say advisors are still just too expensive and 20% are still not sure if they could trust an advisor.
Cerulli recommends that advisor practices prioritize ongoing discovery and relationship building as a key element of their client experience. “Increasing portfolio values and progress toward goals are certainly valuable metrics, but they must be accompanied by the desire to consistently investigate the evolution of clients’ dreams, concerns, and fears,” concludes Smith.
Headquartered in Boston with offices in London and Singapore, Cerulli Associates is a global research and consulting firm.
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