New research finds that independent financial advisors and consumers are aligned on the need for specialized services, especially those focused on retirement income planning.
According to consumers, it’s the most popular service they seek from a financial advisor. And 71.2% of independent advisors desire to advance their specialized knowledge in the many complexities facing the growing retiree market.
These findings come from two studies by the American College of Financial Services—the 2022 RIA Growth and Specialized Knowledge Survey comprised of nearly 400 independent or hybrid advisors at registered investment advisor (RIA) firms, and the Granum Center for Financial Security’s 2022 Consumer Survey comprised of over 1,150 consumers with investible financial assets of at least $25,000.
When asked about what services they’re looking for when they seek professional advice, the survey found that consumers are seeking guidance with retirement planning more than any other area. More consumers chose “understanding how much I can safely spend in retirement” as the No. 1 service provided by a financial advisor than any other service—nearly twice as many (31%) as the “improving the performance of my investments,” which was the second most popular choice at 16%.
What’s more, retirement income planning was the most popular service among younger and older consumers alike and among all categories of investible assets. Moreover, it was equally popular among men and women. The third most popular service was “creating a saving and investing plan for retirement,” followed by assistance purchasing a home, education planning and reducing taxes paid on investments.
According to the RIA survey, one of the key takeaways is that retirement income planning is the area independent advisors most want to grow in advanced expertise, followed closely by issues facing a similar clientele like estate planning and advanced tax planning, and topics such as investment and wealth management.
“Looking at the data, we see a clear need for further education and specialized knowledge in retirement income planning—it is what consumers want and it is what advisors in the RIA community think is valuable,” notes Michael Finke of The American College of Financial Services.
Additional comprehensive benefits of specialized knowledge for emerging RIAs include easier recruiting, faster growth, greater sustainability, diverse fee structure options and the ability to take on more lucrative clients, the study notes. It also allows for businesses to be less susceptible to challenging market conditions because clients will always need specialized fee-for-service guidance.
Services and Characteristics
Do consumers seek out advisors who can evaluate investments and make portfolio recommendations or are they more interested in an advisor who develops a plan to meet various financial goals? The survey found that 52% primarily sought assistance in meeting financial goals, while 47% felt that investment evaluation was a more valuable service.
The findings also suggest that consumer expectations regarding an advisor’s primary value lie outside of security selection. Here, the survey found that 59% of consumers now expect that “the investments my advisor recommends will perform about as well as the average return on popular indexes,” while 41% expect the investments recommended by an advisor to outperform those benchmarks.
Additional findings from the consumer survey show that 27% of consumers listed “knowledge” as the most important attribute when looking for a financial advisor, and 49% cited it as a top-three desired characteristics in an advisor.
The second most important advisor characteristic is “trustworthiness.” In this case, 20% listed the ability to trust their advisor as the most important characteristics and nearly 47% listed it in the top three characteristics. A close third was the ability to “listen to and understand your financial goals.” Nearly 19% of respondents choosing this is their most important advisor characteristics, but 51% placed listening and understanding in the top three advisor characteristics.
In-Person Advice
As to whether COVID change the importance of in-person advice, the consumer survey found that the increase in online communication did not dampen consumer demand for initial in-person financial advice. When asked about their our preferred form of contact with a financial advisor, 52% prefer an initial in-person meeting followed by subsequent Zoom or telephone meetings, while nearly 39% prefer in-person only.
When asked, “How frequently would you like to meet with your financial advisor?” the most common response was every six months (30%), followed by annually (21%). The rest were divided between every four months (16%), every two months (8%), monthly (8%), when needed (12%) and only once (5%).
