Investors are increasingly willing to pay advisors’ fees, but they're also more discerning about those fees and not shy about walking away if they feel they're not getting good value, according to Cerulli Associates.
The Boston-based research and consulting firm’s monthly U.S. asset and wealth management report concludes that financial advisors are in the midst of a fast-changing environment when it comes to fees—one that will require them to adapt to increased transparency and greater client awareness.
"Perception of value is in flux in the financial advice ecosystem, as advisors juggle an increasingly digital, low-cost and fee-transparent landscape," Cerulli said in a press release Thursday. "Advisors and their firms are tasked with justifying how they add value as investors become more discerning about their fees."
Cerulli found that clients have gradually been paying more attention to the fees advisors are charging them. The firm's surveys show that the percentage of investors who believe the advice they receive is either free or who are unsure of what they pay has gone from 65 percent in 2011 to 42 percent in 2018.
Advisors apparently know what’s going on: 75 percent of those surveyed told Cerulli that prospective clients are more sensitive about fees than they were five years ago. About 42 percent of advisors also expect their fees to decline, mainly because of the growth of robo-advisors.
At the same time, clients are more willing to pay for financial advice, with 53 percent saying in a survey last year that they were willing to pay for financial investment advice, up from 38 percent in 2009.
About 76 percent of investors agreed that the value they receive from financial advisors is worth the expense, the survey found.
That means advisors needn't be shy about charging a fair price for their services; but they need to make sure they're offering quality service, according to the report.
"While clients understand that advice comes at a cost and many believe it is worth its expense, if the cost-benefit of engaging with an advisor is not clear, they are more likely to opt for other providers," Cerulli research analyst Marina Shtyrkov said in a statement.
What should advisors do to make sure their fees are perceived as fair by prospects and clients?