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Moving Prospects from ‘Advice Seeker’ to ‘Advisor Reliant’: Factors to Consider

Business Growth Strategies

Firms and practitioners hoping to gain share in the retiree advice market must consistently highlight both the support resources at their disposal and their commitment to prioritizing clients’ best interests, new research from Cerulli Associates suggests.  

Image: Shutterstock.comThis is particularly true for advice seekers nearing retirement, who initially are trying to determine the best sources of ongoing advice. In fact, investors within five years of anticipated retirement seek advisors with access to a strong suite of support services. They also express an affinity for brands familiar to them, according to the latest Cerulli Edge—U.S. Retail Investor Edition.

To that end, as investors near retirement, Cerulli observes notable growth in the proportion of investors who are best categorized as “advisor-reliant.” Once households are within five years of retirement, their share of the advisor-reliant market jumps from 27% to 46%, and then to 57% once they are within one year of retirement. These investors are looking for guidance and become heavily dependent on the use and involvement of advisors, the report observes.  

Brand Recognition

Another important element of defining retirees’ advice relationships is determining the type of advisor with whom they prefer to work. Though preference for an “advisor affiliated with a national firm” garners a plurality of responses in each segment, Cerulli found significant changes at the point of retirement—as this choice increases from 39% to 45%, while the “no preference” option drops from 30% to 20%.

This underscores the importance investors place on the reliability of their advisory relationships as they enter retirement, the report notes; “While they may have had little preference earlier, once they approach retirement, they seek partners with access to a strong suite of support services with an affinity for brands familiar to them.”  

Investors reinforce this preference when considering their best source of investment expertise. According to the research, nearly 4 in 10 (39%) investors identify dedicated home-office teams as their preferred source of portfolio management, followed by individual advisors at 29%.

Cerulli notes that this aligns with its general best-practice recommendation to have client-facing advisors focused on ongoing discovery, engagement and communication to help identify key factors affecting portfolios, while also ensuring that implementation is managed by separate dedicated resources.

Building Trust

The final element of designing a retiree advice relationship strategy is understanding the specific concerns affluent investors have about working with advisors, the report further explains. The good news is that nearly half (47%) of respondents do not believe they have any trouble working with advisors.

That said, the report shows that six other options collected at least 10% of responses when asked about the most difficult part of working with an advisor. These were led by “finding a good advisor to work with” at 20%, followed by “not sure if the advisors are recommending the best products” and “advisors are too expensive,” both at 13%. The three other responses receiving 10% or more included:

  • Advisors do not communicate frequently enough;
  • Costs are not transparent, and I don’t know how much I pay advisors; and
  • I don’t feel like a top priority client for advisors.

Cerulli observes that all of these anticipated obstacles highlight the challenges of building trust with reluctant prospective clients. Once investors engage, however, they widely believe their specific advisor will put their needs first, but until that point, “doubt dominates,” the report emphasizes.

“While most investors have little familiarity with the term ‘fiduciary,’ this type of relationship is the core of client preference,” explains Scott Smith, director at Cerulli. “Communicating this commitment believably in terms that clients understand is vital to ongoing client acquisition, especially as prospects approach their anticipated retirement date,” he concludes.

What’s more, with thousands of U.S. investors entering retirement every day, it has never been more important for wealth management platforms and advisors to support these transitions with a variety of product and service solutions, the report further suggests.