As wealth managers strive to expand their books of business, they work hard to attract the right clientele with marketing programs and referrals from current clients and members of adjacent professions. But ultimately, the choice of advisor falls to the client.
New research from II’s Custom Research Lab reveals that prosperous households in the U.S. seek investment advisors who can provide access to professional-grade investment products, simplify and organize their financial lives, and build and then execute sound strategies that meet their long-term goals. Wealth management clients say they base their selection on advisors’ background and credentials, the strategy and process for collaboration, and their access to investment products that are often unknown or unavailable to retail investors working on their own. The study includes survey 250 current or prospective wealth management clients located in the United States, 54% of whom earn $200,000 or more annually, and 57% of whom are under age 50.
In search of access, simplicity, and strategic thinking
Early results from an Institutional Investor study reveal that when clients choose wealth advisors, they see access to sophisticated investment products that they don’t know about as extremely important (60%), while another 35% see such access as very important. Investment strategies and asset selection rank high among clients when they choose advisors, as more than 90% of respondents see an advisor’s ability to recommend suitable assets and their development of a strategy for long-term financial health as extremely or very important.
However, in a follow-up question, survey data indicates that advisors often fall short of the high expectations of their clients. While a solid majority of respondents (60%) say that access to and knowledge of new sophisticated investment products is extremely important, approximately one-fourth (26%) say they’re extremely satisfied, and another 31% say they’re very satisfied.
Indeed, by examining the extreme values on the four-point scale – that is “extremely important” and “extremely satisfied” – it becomes clear that advisors often fall short of client expectations. While 55% say advisors’ capability to handle documentation, paperwork, and account management is extremely important when selecting a manager, only 30% of respondents say they’re extremely satisfied with their advisor’s ability to do so. Similarly, 41% say an advisor’s ability to bring order to a client’s financial life is extremely important, far fewer respondents (23%) are extremely satisfied with their advisor’s results.
This gap between expectations and actual performance is sustained across many dimensions of the client-advisor relationship in the survey results. It may well serve as a caution to advisors as they work with clients to develop strategies, select assets, and assess their results. Closing this gap between expectations and satisfaction is likely to be a two-way street – that is, by setting expectations on both sides of the relationship, both the client and advisor are more likely to ensure high performance and high satisfaction.
Finding and selecting an advisor
In an effort to understand how U.S. wealth management clients choose their wealth advisors, the study queries respondents first on the source of their prospective advisors – that is, “how did you find your advisor?” – and then on the criteria they used to evaluate them.
Direct referral from other professionals such as bankers, lawyers, accountants, etc., were the initial source of advisors for 60% of survey respondents. Notably, far fewer (28%) say they found their advisor through a friend or family member. (The survey allowed respondents to select more than one source for their advisor.) A majority of clients cited advertisements on television, online, or in print (57%), and direct outreach from an investment/wealth advisor was cited by 51%. Clearly, direct referrals from professional peers are a sound way to match clients with service providers. However, the strong showing of advertising and direct outreach from advisors demonstrates that marketing programs from advisors and their firms may well be necessary, if not sufficient, for advisory firms to generate market awareness, new account leads, and ultimately new clients.
Having found one or more candidates to serve as their wealth advisor, clients are most likely to base their decisions on an advisor’s professional background, education, and credentials, as 59% of respondents say these criteria were extremely important in their decision. One-half of clients in the survey say the advisor’s “proposed strategy and process for working together” was extremely important to their decision, and another 26% say it was very important. Less compelling to prospective clients were various forms of technology for communication with clients or asset selection, each of which was cited as very important in their decision making by less than one third of respondents.
You can read more about this study, along with II’s research on model portfolios and their value to wealth managers and their clients, in forthcoming reports from II’s Custom Research Lab in October.
