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Clients Less Fee-Sensitive Than Many Advisors Think: Cerulli

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Although wealth managers have serious concerns about fee compression, a Cerulli report says that it’s a primary determinant in choosing a provider for relatively few investors.

In its report U.S. Retail Investor Advice Relationships 2018: Optimizing Engagement, Cerulli says that client behavior is less tied to fees than advisors might think.

Although investors “may not hold high regard for the financial sector overall,” says the report, they are pretty happy with their own providers and advisors — even though they are broadly aware of the types and amounts of fees associated with their investing relationships, the report points out.

In fact, relatively few investors, says the report, “cite fee levels as their primary determinant in provider selection.” And even though they are becoming more aware of fees, they’re still pretty well satisfied with the status quo.

Still, advisors do have to get the point across to clients and particularly to potential clients that they provide substantial value because of their “comprehensive advice relationship” — especially since those would-be clients “may already believe they are receiving maximum value from their current providers.” This is perhaps particularly important with 10% of all households citing “competitive fees” as the reason for beginning their relationship with their primary provider.

Being pressured by provider firms to make use of home-office portfolio management options when they’re not anxious to do so complicates things for advisors, especially when their own portfolio management actions can be such a prominent part of client relationships. Compressing fees on top of such pressure can constitute a real threat, which advisors can best counter by reinforcing their value proposition and doing their best to match investor preferences.

Says the report, “Willingness to pay for advice correlates highly with advisor reliance, reflecting that investors recognize that the personalized service they receive from traditional advisors comes with an affiliated cost. Facing an era of greater transparency, advisors must be able to enumerate the breadth of their service set and be able to explain how each service contributes to improved investor outcomes.”


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