For every client your advisory firm has, there’s at least one more you could have in the future, someone you wouldn’t even have to compete for. The Ensemble Practice found in a recent survey that only 32.4% of high-income consumers have advisory relationships. And though most people haven’t ever worked with an advisor, the industry has already managed to disappoint close to a quarter (23.9%) of its potential clients—those who’ve had an advisor, left and never come back.
When seeking out new professionals, clients trust their friends and family the most, but they also notice brands and assign a lot of importance to the reputation of a firm. The way consumers approach their search varies by gender, by wealth and by source of wealth, but it’s universal that consumers begin their search by asking someone they are close to: “Do you know a good advisor?”
To reach those ready to receive advice, firms must both invest in their existing client relationships and seek the endorsement of present-day clients—but also reinforce their brands through marketing efforts.
Who Has An Advisor?
In July 2021, we surveyed 500 consumers with a personal income of $100,000 or more (most had a net worth between $500,000 and $5 million), targeting them regardless of whether they used advisors.
We found that financial advice is only reaching a third of its potential clients. Only 32.4% of the respondents currently worked with a financial advisor, while 43.7% never had. Interestingly, nearly a quarter of those surveyed had worked with advisors in some capacity but chose to leave the relationships.
These results suggest that advisors will see a lot of opportunity in the future, but only if they can help those people who have never experienced advice come to understand their services and learn how to select the best provider. There are far more people who’ve never benefited from financial advisors or seen their value than there are who have. If firms could only identify the “triggers” that cause people to seek advice—and then persuade those people to trust a firm’s financial wisdom—there’s an enormous potential for growth. But that’s a formidable challenge, and we have already made some mistakes.
The opportunity is present in every wealth segment. Even among those investors with more than $5 million in net worth, 18.4% have not formed an advisory relationship; 26.4% of those with between $1 million and $5 million have also never had one. Nor have the 41.6% of consumers with between $500,000 and $1 million.
Sadly, we have already disappointed many people. It’s going to be hard to persuade that quarter of the respondents who have already left their advisors to come back. And the population of those “disappointed” people who left an advisor can be found throughout the wealth spectrum: 25.7% of consumers with between $1 million and $5 million have left a relationship, while 24.2% of those in the half million to $1 million bracket have.
Still, wealthier consumers are most likely to work with an advisor. So are business owners and retirees. Age is also a determining factor, if only through its correlation to wealth. Young and wealthy individuals are just as likely to hire an advisor as those who are middle-aged and wealthy.