Year over year, RIAs and fee-based advisors say enhancing profitability is the number-one practice management concern, and the number-one way to increase profitability is by adding new clients, according to our annual “Advisor Authority” study of roughly 1,600 RIAs, fee-based advisors and individual investors.
Differentiating your practice to attract and retain clients has become more important as competition increases, fee compression is on the rise and commoditization of financial advice puts more pressure on your bottom line. As you look for new ways to tap into new markets, “Do It Yourself” investors present a compelling opportunity.
Who Is Most Likely To Go It Alone?
More than one-third of investors do not work with an advisor (38%). This breaks down to four in 10 (42%) mass affluent and emerging HNW investors, and one-quarter (25%) of HNW and ultra HNW investors. The potential is huge.
This year’s “Advisor Authority” study shows that the majority of investors without a financial advisor (59%) say the primary reason they go it alone is because they prefer to manage their own assets. As they move up the AUM scale, more than two-thirds of the HNW and UHNW investors without an advisor (68%) prefer to manage their own assets. In addition, more than three-fourths of men investors without an advisor (78%), compared to just under half of women investors without an advisor (49%), prefer to manage their own assets.
DIY investing has evolved, as online access to virtually unlimited information has empowered consumers. Nearly every type of investor can educate themselves to understand more about their basic financial needs. Now, the fundamentals of tax preparation, portfolio management and financial planning have become automated with simple online tools. And just like consumers, more RIAs and fee-based advisors are adopting digital solutions to benefit their practice and their clients.
There’s no doubt these DIY solutions have created more awareness, tremendous cost savings and greater consumer value. But are DIY investors truly prepared to go it alone? Information is only as good as its source. Access to more online tools is only part of the equation. And when it comes to comprehensive holistic planning, there’s still not an “app for that.” To ensure the best financial outcomes, there is no replacement for the power of transparent and unbiased guided advice.
So what matters most to DIY investors? And how can you adapt, to gain their trust and win their business?
Inside The Mind Of DIY Investors
More than half of investors without an advisor (54%) have an optimistic financial outlook for 2019. Yet, there’s an obvious disconnect, as only 38% have an optimistic outlook for the U.S. economy and only 36% have an optimistic outlook for the U.S. stock market. Nearly half (49%) are concerned about a U.S. economic recession and nearly two-thirds (64%) believe market volatility will increase. Clearly, DIY investors are highly attuned—and highly apprehensive—about the challenges that lie ahead.