A structural shift is underway in the advisory industry, according to BlackRock’s inaugural Advisor Trends Survey, released Wednesday.
Some 54% of U.S. household financial assets are now held by high-net-worth and ultra-high-net-worth families, up from 27% a decade ago. This new reality is reshaping where growth opportunities exist for advisors and raising expectations for more sophisticated advice.
“As high-net-worth wealth rises, advisors face a clear mandate — deliver more personalized, tax-managed solutions,” Jaime Magyera, head of BlackRock’s U.S. Wealth and Retirement Businesses, said in a statement. “Our research shows advisors are increasingly customizing model portfolios with SMAs and private markets to meet the complex needs of wealthy clients.”
At the same time, the survey findings show that a notable gap exists in what clients say they need help with and what advisors are offering, Magyera said.
“The advisors positioned to grow will be the ones who create capacity for deeper relationships and modernize how they deliver investment, planning and retirement outcomes," she said.
Escalent, the independent research firm, conducted the survey between Aug. 22 and Sept. 7 among more than 1,000 U.S. financial advisors across channels, regions and firm sizes, 92% of whom serve clients with $5 million or more in assets under management.
Model Portfolios Are Essential Tools
Survey respondents reported that model portfolios are freeing up their time for higher-value client work. Eight in 10 said using model portfolios helps them spend more time with complex or high-net-worth clients, rising to 87% among millennial advisors.
Compared with previous generations, the survey found that millennial advisors are likelier to prioritize growth, operational efficiency and the use of sophisticated investment and tax strategies, such as concentrated stock solutions.
Nine in ten advisors surveyed said they use model portfolios and expect assets under management in that investment approach to increase to 50% in the coming year.
Customization is also on the rise, according to the survey. More than half of high-net-worth advisors who use model portfolios in their practice said they use separately managed accounts, and upward of 30% incorporate alternative investments, including private markets or liquid alternatives, in their model portfolios.
The findings showed that advisors use model portfolios for clients of all sizes in order to shift more of their time toward relationship-building and providing personalized planning services.
Advisors in the survey reported that some of the most time-intensive services are also ones most critical to attracting and retaining high-net-worth clients, including these:
- Estate planning — 67%
- Intergenerational wealth planning — 58%
- Liquidity event planning — 53%
Many advisors are outsourcing specialized tasks and leveraging technology to free up time for relationship-building.
Tax Planning and Private Markets
Tax considerations are most relevant among high-net-worth investors, and 92% of advisors who serve these clients said they had been asked for tax guidance, according to the survey. However, only 17% of advisors said they consider after-tax returns a primary driver of portfolio decisions.
BlackRock said the findings suggest a gap between client expectations and advisor workflows, which creates an opportunity for advisors and firms to differentiate themselves through currently underused tax-management strategies.
More than half of all advisors and three-quarters of wirehouse advisors invest client assets in private markets, although average portfolio allocations remain relatively small at about 7%.
Advisors cited liquidity concerns and a lack of confidence as key barriers, with 68% of respondents saying they need additional education on portfolio construction involving private assets.
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