Advisors significantly underestimate the number of the clients who maintain a direct relationship with an investment services provider, according to a new report.
Cerulli Associates, Boston, Mass., published this finding in a summary of results from a report, “The Cerulli Edge – Advisor Edition, 1Q 2012 issue.”
According to Cerulli, advisors estimate that only 20% of their clients maintain a direct account with providers. But Cerulli’s survey of clients who use a financial advisor reveals that 76% of clients own such direct accounts.
Cerulli says that direct platforms compete for primary provider status by mimicking financial advisor services, including portfolio asset allocation recommendations, fee-based managed account programs and private client services.
“For clients with between $100,000 and $2 million in investable assets, direct firms and advisors compete head-on for client relationships,” says Katharine Wolf, associate director at Cerulli Associates. “Investors who do not want to pay for advice or who have not been approached by an advisor often default into the direct model, as direct firms generally have well-known brands and solid reputations.”
The greatest threat, says Cerulli, is to those advisors servicing clients with between $100,000 and $2 million in investable assets. Cerulli contends that these investors may choose to remain in the direct channel, content with their service through managed account programs and direct representatives.