As U.S. investors lost some $10 trillion in assets over the last year—and roughly 300,000 households dropped off the high-net-worth roles—the investors who remain affluent are increasingly reliant on their financial advisors, a Cerulli Associates study found.
Affluent investors, which the Boston-based research firm defines as those with more than $2 million in investible assets, today are most concerned with asset preservation, and even if they were self-reliant investors in the past, the volatility of the last year and the prediction of more coming down the pike is prompting them to seek a relationship with an advisor, the study said.
The “advisor-reliant” category among affluent investors increased to 43% from 36% a year ago, as some “self-directed investors,” “advice-seekers,” and even “passive investors” sought additional help in preserving assets in a way that was aligned with their goals, according to “U.S. Retail Investor Advice Relationships 2023: Client-Centric Engagement.”
With this shift, 55% of advised assets now reside within fiduciary advisory accounts, an increase from 34% in 2011, Cerulli found.
The majority of affluent investors in the advisor-reliant category (67%) said access to customized investment solutions was the primary reason for hiring an advisor. Cerulli also found that 62% of managed account sponsors are responding to this preference with a greater priority on personalization tools.
“Creating asset allocations matching investors’ risk tolerances and timelines has long been the core element of personalized portfolios,” wrote Scott Smith, director, advice relationships, in the report. “The ongoing evolution of wealth managers’ technology stacks is making it much easier for advisors to take this personalization element to the individual security level.”
According to the study, the highest percentage of advisor-reliant clients was found in the independent RIA channel, as 66% of their clients can be considered reliant in that they see the value in the relationship and prefer the advisor have investment discretion while they have little or no involvement.
High-net-worth investors (those with more than $5 million in investible assets) also saw a shift, with the number of passive investors in this group dropping to 18% from 25% in 2022 as these investors became more engaged with their finances, the study found.
And finally, when seeking an advisor, clients 60-years-old and older cited trust and reputation as their key metric for satisfaction. Younger clients, those under 30 years of age, said service was equally important, the study said.
With all the support advisors get in managing their clients’ assets, Cerulli recommended they focus on “ongoing discovery and relationship building as a key element of their client experience.”
“Increasing portfolio values and progress toward goals are certainly valuable metrics, but they must be accompanied by the desire to consistently investigate the evolution of clients’ dreams, concerns, and fears,” Smith wrote.