Thought Leadership in Action

Forty percent of investors in their 40s expect to rely on their financial advisor for products and services beyond investment management and financial planning.

Michael Thrasher, RIA Intel, Dec. 7, 2020

The wants of investors are changing and many RIAs are not prepared.

Young investors overwhelmingly want their advisor to share the same political views and religious values. They also want their advisor to have a good professional network and personality. Now, they are demanding even more.

Investors aged 50 and younger have a significant interest in expanding their relationship with their financial advisor, according to Cerulli Associates, a Boston-based research and consulting firm. That’s a positive thing for wealth managers, which almost always seek to capture more wallet share and strengthen relationships with clients (which could lead to more referrals).

But not all RIAs are providing everything that clients of the future are looking for, potentially setting themselves up for client attrition instead.

A survey of 9,000 investors earlier this year by Cerulli found 22% expect to rely more on their financial advisor for products and services beyond investment management and financial planning. This was especially the case for younger investors; 40% in their 40s expect they will rely more on their financial advisor, compared to only 9% in their 70s.

“Prospective clients in this segment are desperate for help in sorting out their competing financial priorities but draw little interest from traditional advisors unless they accumulate substantial assets,” Scott Smith, director of advice relationships at Cerulli, said in the report.

“In many cases, firms have sought to fill this void with digital tools, which serve ably on investment portfolios but lack the emotional connection and customized advice investors seek on the other financial quandaries they face.”

Advisors don’t necessarily have to obtain licenses and sell new products and services themselves. For example, insurance needs are a way advisors can expand their offerings. “By offering a wide-ranging suite of insurance products, either directly or through trusted referrals, comprehensive financial planners can substantially improve the comfort and outcomes of their clients but must assure that any conflicts of interest are minimized and disclosed,” Cerulli’s report says.

The Covid-19 pandemic has shown that investors are comfortable with online banking solutions — some might never return to a physical bank branch again — bolstering the opportunity for wealth managers to offer cash management services. If advisors add cash management to their core services it “could significantly disrupt the banking segment,” according to Cerulli.

There are some examples of this already. In January, Buckingham Strategic Wealth, a St. Louis-based Focus Financial Partners RIA, revealed that its advisors would have access to Flourish Cash, a new cash account service that leverages partnerships with a group of FDIC-member banks to offer a higher interest rate than most checking and savings accounts.

To secure themselves as the single provider of financial services to their clients, advisors should also consider partnerships with credit and payment providers, “a logical step for traditional wealth management providers to round out their suite of services and create additional value,” according to Cerulli. Most of the largest bank-affiliated wealth managers do this already.

The largest banks have been trying to be everything to every customer for years, but the advent of new companies and technology has made it easier for even the smallest RIAs to offer a comparable suite of services.

“The biggest challenges for providers are remaining top of mind among investors in times of need and assuring that they have a true path of least resistance to onboarding clients. By rounding out their product and service offerings, either internally or through partnerships, providers can better serve their clients and limit attrition by clients seeking more comprehensive platforms. Not every client will use every option, but each one not offered by a provider presents competitors with an opportunity to completely displace the incumbent.”