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Life Health > Life Insurance

Wealthy investors prepared to pay for advice

By Warren S. Hersch

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Direct retail channel assets are forecasted to hit $5.9 trillion by year-end 2016, up from $4.3 trillion at the close of 2012, according to new research.

Cerulli Associates unveils this finding in “Retail Investor Product Use 2013: Impact of Change in Investor Risk Appetite” In its 5th iteration, the report examines the behaviors, opinions and preferences related to financial products and services used by U.S.-based investors across the wealth spectrum.

The Cerulli report indicates that advisory channel assets, pegged at $15.4 trillion at year-end 2012, retains the lion’s share of an estimated $26.6 trillion in assets controlled by U.S. retail investors. The balance of the total is held by other intermediate channels.

“Households with $500,000 to $2 million in investable assets represent significant retirement product placement opportunities, and in many [cases] have substantial advice needs,” the report states. “Investors in these segments in most cases have the potential, but not the guarantee, of creating reliable retirement income streams from their asset bases.

“While target-date funds have gained traction as preferred investment options in the qualified plan market, retail investors have yet to develop much interest for the options outside these programs,” the report adds. “Rather than continuing to market these funds, providers may find greater acceptance using simplified discretionary mutual fund advisory programs to service lower wealth investors.”

The report’s authors believe that advisory firms should support fiduciary standards of care to boost their market-share. They also expect that unified managed accounts will become advisors’ “preferred platform.”

Turning to features that investors want in retirement products, the report notes that nearly half of investors (48 percent) want the ability to “withdraw additional funds” if needed.

As to investors’ willingness to pay financial service professionals for advice, the research observes gains among households with investable assets ranging from $500,000 to $5 million-plus. The rise is most marked among the wealthiest of them: up 7 percent between 2012 and 2011.

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