As financial advisors face the DOL fiduciary ruling and other major changes, their main priority still is to know what matters most to their clients.
Jefferson National released a study on Monday, intended to help advisors better serve current clients and attract new prospects to grow their practice.
“We studied investors in this year’s Advisor Authority to arm advisors with actionable insights that help them understand clients’ needs and build deeper relationships,” Mitchell Caplan, Jefferson National’s chief executive, said in a statement.
“By providing personalized planning and comprehensive guided advice, advisors can help their clients build more wealth—and help their practice grow more assets under management.”
Harris Poll conducted an online survey within the U.S. in March, using a sample from its panel of financial advisors and investors. Among the financial advisors were 440 independent Registered Investment Advisors and 243 Broker-Dealers. The investor sample comprised 167 mass affluent, 184 emerging high net worth, 199 high net worth and 183 ultra-high net worth.
The study identified two investor types and three advisor profiles.
Two predominant investor profiles emerged from an evaluation of chief concerns and unique preferences. Returns seekers, 24% of those profiled, follow an active investing strategy and require low-touch engagement.
Seventy-three percent of these are millennials, and 69% have $1 million or more in investable assets. For a third of these investors, the fiduciary standard was their main factor for selecting an advisor.
A big majority thinks volatility will increase, and feels pressure to respond by changing their strategy.
Seventy-two percent expressed confidence that robos could manage volatility. Leveraging robos was a top factor for selecting an advisor.
Relationship seekers, 44% of investors profiled, are older and less affluent: half are boomers, and 70% have less than $1 million in investable assets.
Their investment strategy is passive, and they require high-touch engagement. Three-quarters said years of experience was their top factor for selecting an advisor.
Sixty-five percent expect volatility to increase, but only 27% feel pressure to revise their strategy.
Robos are a nonstarter for this group. Thirty-three percent were not familiar with robos at all, and just 14% were confident that robos can manage volatility.
The study identified three prevailing advisor profiles. Thirty-six percent are tactical managers leaning toward active investing strategy and low-touch engagement. Eighteen percent have more than $250 million in assets under management.
Fifty-nine percent said Gen X clients would be their primary target over the next 12 months. A quarter said their top strategy to attract new clients was social media.
Most think volatility will increase, and three-quarters feel pressure to revise their strategy in response. A similar proportion are confident that robos can manage volatility.
Twenty-two percent of advisors profiled follow an active investing strategy and seek high-touch engagement. Active advisors manage more than $250 million in assets.
Forty-eight percent say Gen X clients will be the primary target over the next 12 months, and 46% will seek to attract new clients through social media.
Three-quarters think volatility will increase, and two-thirds feel pressure to revise their strategy. However, only 46% are confident that robos can manage volatility.
Relationship builders, 36% of advisors who were profiled, follow a passive investing strategy and seek high-touch engagement. Only 8% of these have more than $250 million under management.
Forty-eight percent say boomer clients will be the primary target over the next 12 months, and 46% say their top strategy to attract new clients is working with clients’ family and children.
Two-thirds think volatility will increase, but only 44% feel pressure to revise their strategy. A mere 19% are confident that robos can manage volatility.
Alignment of Interests
According to Franklin National, the study found strong alignment between certain investor and advisor profiles. It cited these examples:
- Return seekers and tactical manager advisors tend to anticipate an increase in volatility, are likely to revise their strategy in response and are more confident in robo advisors
- Relationship seekers and relationship builder advisors tend to be more concerned about low returns on investment, less likely to respond to volatility and less confident in robo advisors
“As the data clearly shows, both advisors and investors can be profiled by their shared preferences and characteristics,” Jefferson National’s president Laurence Greenberg said in a statement.
Jefferson National said industry studies show that the key to growth and sustainability relies on an advisor’s ability to clearly understand and align with their clients’ needs. The recent RIA benchmarking study from Charles Schwab finds that the advisor-client relationship is critical to driving growth, especially in challenging markets.
According to a 2016 study by E&Y, a $175 billion to $200 billion revenue opportunity exists for the advisory firms that focus on aligning with clients and using client experience as a competitive advantage.