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Practice Management > Marketing and Communications > Client Outreach

How to Win Over the Huge Advisor-Averse Market

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What You Need to Know

  • A striking 34% of affluent U.S. households opt not to work with an advisor.
  • A majority said they preferred to manage finances independently.
  • Advisor-averse investors are looking for practical information about investing and managing finances.

How do you get people to buy something they likely need but don’t want?

That’s the question raised by recent Herbers & Co. research. It revealed that a striking 34% of U.S. households with at least $250,000 of investable assets opt not to work with a financial advisor.

This segment, which we might call the advisor-averse market, represents a huge business development opportunity for advisory firms. But it’s one that must be pursued differently from the conventional approach.

Before we discuss how advisors can most effectively penetrate this market, let’s look at what our research turned up.

We surveyed 1,000 consumers across the nation, and along with finding that more than a third opted not to work with an advisor, we found that the total is lopsided according to gender: 40% of male respondents reported not having a financial planner, compared with 29% of women. Respondents’ reasons for avoiding advisors broke down into five categories:

A desire for independence: 52% of survey respondents cited wanting to maintain independence and handle finances themselves. Some voiced distrust of advisors and financial systems.

Interestingly, respondents with $6 million or more were least likely to prioritize independence — just over 20% did so. On the other hand, among those with wealth between $800,000 and $2.6 million, more than 60% cited a desire for independence.

Doubts about value: 45% of individuals without advisors pointed to uncertainty over the quality of the advisor and value of their advice.

No perceived need: Many people feel they simply don’t require the services of a financial planner. Some already received financial advice from a family member or friend. Others said they don’t need advice because they’ve already achieved their goals.

Conflicting values: Some survey respondents said they could not find an advisor who shares their values. Respondents also expressed concern that planners would be judgmental about the state of their finances.

A lack of time: 14% of individuals said the time required to research and choose an advisor prevented them from hiring one.

How to Target

How should advisors target potential clients in this un-advised segment? The key factor here is this cohort, unlike typical advisory clients, does not appreciate the value of advice.

That goes a long way toward understanding why so many want to keep control of their financial decisions, why they believe they can make those decisions on their own, and why they resist the idea of delegating.

Our experience helping clients mine the advisor-averse market suggests that success is best achieved by educating them in a new way and being willing to reframe the advisor-client relationship.

Firms that have successfully converted advisor-averse clients have learned to educate them at the prospect stage of the relationship on how advisors do what they do.

Many prospects who approach advisors aren’t interested in delegating responsibility. Rather, they’re curious: They want to understand how advisors tackle specific problems. These individuals seek that information so that they can do a better job of being their own advisor.

But that interaction nonetheless tends to validate the advisor’s services and engender some trust. It’s certainly not what most advisors are used to doing, but educating the curious consumer about how to do the job of an advisor can often open the door to a business relationship.

Changing It Up

To make that happen, though, advisors need to change their traditional scripts.

When they meet with prospects, most advisors explain things like the value of working with a fiduciary, why financial planning is important, which investing approach is wisest or why a certain fee model is best.

The advisor-averse individual doesn’t want to hear all that. It sounds to them like sales propaganda.

Instead, they’re looking for practical information about investing and managing finances — such as why they should dollar cost average, or how they can go about choosing one mutual fund or ETF over another.

They might want to know the best way to calculate their retirement funding needs, or how to tell the best time to exercise stock options.

When you walk a client through how to accomplish practical tasks, they begin to trust you. They see that you have practical knowledge and ability, that you’re not simply spouting salesy talking points.

And critically, they get a glimpse of all that they don’t know. In this process, we see clients begin to value expert advice. And that paves the way for them to move from being die-hard do-it-yourselfers to paying consumers of financial advice.

But don’t expect these reluctant consumers to hand you the keys to their financial life. After you have shown them that you know things they don’t, it’s time to position your services.

For the advisor-averse set, the tone should not be “let me show you all the things I can do for you,” but rather “let’s look at all the activities we can partner on.” These clients want someone to work with them, not to do it all for them.

That might be a challenging model for some advisors. Until recently, we’ve assumed that clients—at least the desirable ones—want to delegate. But consumers are increasingly choosing to take more responsibility for their finances, a trend that has been fueled by the pandemic.

To penetrate this big market, advisors have to be willing to share responsibilities with clients, to let them be co-pilots. Talk about the things you’ll be responsible for and the things they will be responsible for. That will allow clients to maintain the sense of control that they value so highly.

The client’s perspective should not be that they’re simply going to be told what to do, but that they and the advisor will work to find joint solutions.

Pandemic Effect

During the COVID-19 era, more people have been tackling their own investing and financial affairs. Considering that, it’s critical that advisors remove the judgments we have about what’s right and wrong for consumers.

One client might be tech-averse when it comes to communication, preferring to talk through the issues with an advisor. Another might want to text back and forth.

Other clients might be withholding the full picture of their financial activities for fear of judgment. Our research has shown that women especially avoid reaching out to advisors due to fear of judgment.

To expand into the market of reluctant individuals — the largest available pool of potential new clients — advisors must learn to withhold judgment and communicate differently.

We must also learn to accept collaborative relationships. It’s a shift, and it might not be something every advisor can get comfortable with. But there’s no disputing the fact that there’s a huge market of potential new clients on the sidelines, waiting to be served on their terms.