Despite frightening market volatility and an unprecedented worldwide virus-driven economic shutdown, individual investors report that they are very satisfied with their advisor relationships, with 77% stating their advisor is worth the cost and 74% reporting that they would recommend their advisor, according to new research from Cerulli Associates.
The new study on the state of investor-advisor relationships, commissioned by the Securities Industry and Financial Markets Association (SIFMA), surveyed individual investors with between $100,000 and $1 million in investable assets. These bread-and-butter investors control nearly 23% of investable assets in the U.S., over $11 trillion. At the same time, they represent 33 million households—some 26% of the U.S. population—and currently hold $6.5 trillion with securities firms, with an average relationship size of $135,000, Cerulli said at a presser to release the results today.
“Just 1% of investors report being dissatisfied with their advisor,” said Scott Smith, Cerulli’s director of advice relationships. “That’s pretty shocking to me, because I know how often I can be underwhelmed with my service providers.”
At the same time, the fact that 77% of investors believe that their advisors are worth the cost is noteworthy, given that investors are more informed about the costs of investing and have contributed to fee compression in the asset and wealth management industries.
According to the SIFMA-Cerulli Individual Investor Project, available here, trustworthiness, dedicated relationships and personalized advice are the main drivers of investors’ satisfaction with their advisors.
While 78% of respondents reported they use advisors, some may actually use bank customer service reps or 401(k) plan staff, Smith said.
Individual investors named retirement planning as the primary service they receive from their advisor. Perhaps not surprisingly, retirement income planning and retirement planning are the most common services offered by advisors serving individual investors, Smith said.
Already retired individual investors rely on personal investments for nearly two-thirds of their retirement income, Cerulli found.
And that is likely to increase. Some 38% of investors reported they will need more advice in the future, the survey found.
“We commissioned Cerulli to do this report because our wealth management members felt strongly it was important to get more focused on the relationship between investors and their advisors,” said Ken Bentsen, CEO of SIFMA.
While advisors worry about competition from robo-advisors and the proliferation of digital solutions, Smith said they should see technology as a help rather than competition, something that allows them to spend more time on establishing and growing personal planning relationships with clients.
“Digital engagement allows for scaling of basic services and more time for personal interaction. It’s important to let clients know that their planning and portfolios are becoming customized to their needs,” Smith said.
Investors cited a lack of human interaction as the primary obstacle to digital relationships, he added. Some 66% of investors prefer to interact with a human rather than use the latest technology tools, according to Cerulli.