Recent research by Janus Henderson Investors uncovers a timely opportunity for growth-minded advisors as we head toward year end.
According to our latest Investor Survey, which features responses from more than 1,500 investors age 50 or older with at least $250,000 in investable assets, advised investors approaching retirement are feeling well served by their financial advisors. More specifically, 79% of investors working with an advisor report receiving a retirement income plan, and 54% said that communication with their advisor increased during the uptick in market volatility earlier this year.
When asked how likely they were to recommend their advisor to a friend or colleague in need of a retirement plan on a scale of 0 to 10, respondents’ average score was 8.3, indicating a strong likelihood that they would make a referral.
Playing the Field
Complementing data showing that affluent investors are pleased with their advisors, the survey also found that most investors maintain relationships with several financial institutions, including brokerage firms, wealth management firms and banks.
Just 11% of affluent investors report consolidating their assets to work with a single financial institution. By contrast, 33% work with two providers, 29% work with three, 15% work with four and 12% work with five or more providers.
When asked about their views on reducing how many financial institutions they work with, 67% of respondents see no need, while 13% have begun reducing the number of providers, and another 13% plan to do so.
Challenges of Maintaining Multiple Financial Relationships
While the decision to work with multiple financial institutions is personal, with reasons behind it varying from inertia to life events such as marriage, divorce or job change, there’s no denying that it creates challenges for investors, particularly those approaching retirement or who have already retired.
For example, retirees may find adhering to their retirement income plan more challenging if there are cash inflows and outflows to and from multiple providers. As a result, retirees may be spending more or less than their retirement income plan recommends.
Other issues that can arise when clients are working with multiple advisors and institutions include:
● Coordination concerns: Investors can end up owning similar funds, insurance policies or investment vehicles across accounts. Similarly, tax-loss harvesting or charitable giving strategies may be duplicated or neglected when working with multiple providers.
● Incomplete view of wealth/performance: Without centralized reporting, investors may struggle to achieve a holistic picture of their finances and investment performance.
Strategic Opportunity to Grow Share of Wallet
Even as affluent investors are satisfied with their advisors and value the guidance they receive, their assets are fragmented across multiple financial relationships. This, then, presents both a challenge and an opportunity for advisors.
Importantly, clients must be able to see what’s in it for them before they will begin to reduce the number of advisors they work with. Advisors who can help clients understand the value of consolidation will benefit when they make the move.
One way to demonstrate this value is to ask clients to share statements from outside accounts (old 401(k)s, IRAs, brokerage accounts, annuities) for a comprehensive analysis.
Using this review to identify overlaps in investment exposures or tax inefficiencies created by scattered holdings will help open clients’ eyes to how consolidation can improve their performance. It will also help build the necessary trust with clients to increase share of wallet.
By proactively addressing the inefficiencies and risks of working with multiple institutions, advisors can demonstrate their value beyond portfolio performance to build trust, deepen client relationships and grow assets organically while empowering clients with clarity, confidence and control over their financial future.
Matt Sommer is head of the specialist consulting group at Janus Henderson Investors, a global asset manager.
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