You might have heard the phrase “Get them when they’re young!” Maybe you haven’t heard it said, “Get them when they’re 50.”
But that’s what new research from Cerulli Associates says about advisors prospecting for clients.
According to the firm’s research, investors reach a critical point in their 50s—that’s when they usually decide whether they are going to ask for help with their myriad financial questions or go it alone as self-directed investors.
The research and analytics firm published its observations in its report “The Cerulli Edge—U.S. Retail Investor Edition.” The findings were released in the second quarter 2022 edition.
The firm worked with partner Phoenix Marketing International to divide client respondents into four behavioral groups: 1) passive investors (who set it and forget it); 2) self-directed investors (who are very engaged and active in their own finances), 3) advice seekers (who have some do-it-yourself characteristics but are looking for new insights from counselors); and 4) advisor-reliant investors who are heavily dependent on financial professionals for final decisions.
“On an age basis, the most important trend is the substantial increase in the advisor-reliant segment as investors move into their 50s,” Cerulli said in the report. “In younger cohorts we see a plurality of respondents falling into the advice-seeker category, at 59% among those ages 30 to 39 and 48% in the ages 40 to 49 group. These investors are looking for help but have yet to step back into a fully hands-off role when it comes to their portfolios.
“By age 50, many have had enough experience with their current provider to turn over full control, resulting in a jump in the advisor-reliant category to 37% among those ages 50 to 59 and, subsequently, to 52% among those in their 60s.”
Since advice seekers become less prevalent in the older age groups, Cerulli says that it’s important to build relationships early with those ages 30 to 49 as these people mature into the best possible clients. They don’t have assets yet, though they are likely looking for one-on-one help.
At The Crossroads
In a press release announcing the research, Cerulli director Scott Smith said investors in their 50s are at a crossroads.
“These former advice seekers can either turn over control to their trusted advisors or use the knowledge they’ve captured over the years to take a more active role in the ongoing management of their portfolios long-term,” he said.
The need to capture a pipeline of immature investors, and get them as they are ripening into mature ones, is a trend shaping the structure of the industry, Cerulli said.
“A key aspect of recent mergers and acquisitions, such as Morgan Stanley's acquisition of E*TRADE and UBS's acquisition of robo-advisor Wealthfront, are attempts to vertically integrate different provider channels under one roof to capture more of the emerging and mass affluent market,” Cerulli said. “This is particularly crucial for the advice-seeker investor cohort, who are particularly satisfied with the value they receive from their provider but may find the service offerings are becoming too restrictive for their needs at the moment.
“Having a pipeline to go from a robo-advised account (such as Wealthfront) to a more formal advice relationship (such as UBS) would enable providers to keep these assets in-house rather than potentially lose these eager clients to a rival. Cerulli expects further acquisitions in the retail direct or robo-advisory channels to take place in order to facilitate fewer transfers of assets and long-term provider-client relationships.”