Advisers Say Biggest Fear is Fear Itself

Of advisers asked in a recent survey who or what their biggest competition is, more than one-third (35%) said it is clients’ fears, which results in lack of financial action.

Slightly more than a quarter of advisers (27%) surveyed by Principal Financial Group said other financial advisers were competition. The vast majority of advisers, 90%, said their client base has either increased in size or stayed the same since the economic downturn, suggesting that most clients did not run, and instead stayed to receive guidance, said Timothy Minard, senior vice president, retirement distribution at The Principal.

Fear is also reflected among clients in their risk tolerance, Minard said. The survey found that 69% of advisers said their clients have less tolerance for taking investment risks since the economic downturn.

Nearly three quarters of financial advisers (71%) report that their clients’ desire for financial counseling and advice has either increased significantly or increased somewhat compared to this same time last year. With this in mind, advisers are modifying their businesses to meet new client demands. Many of these changes are not difficult, Minard told PLANADVISER.

Some of the most popular changes financial advisers are making include providing financial education to clients (61%), focusing on diversification of investments (56%) and paying close attention to financial risk management (49%). Most of these seem like pretty standard fare, admitted Minard, but what it shows is advisers putting a lot of time into the role of counsel to clients. “What I don’t see if advisers emphasizing performance or particular investments,” he said.

One of the takeaways from the survey, according to Minard, is that advisers are “getting back to basic fundamentals. It’s not about the next silver bullet.” In fact, products are figuring minimally into discussions now, he said. “Clearly consumers aren’t asking to be wowed t by brilliance.”

Advisers are also changing services to help clients deal with financial stress brought on by the economic downturn. Popular ways to help clients include: touching base with clients on a regular basis (81%), offering face-to-face meetings (81%), providing reassurance (71%), keeping an open door policy (68%), and helping them create a financial plan (65%).

According to the advisers surveyed, the number one financial lesson to be learned in the past decade for American consumers is the need for more financial guidance (34%), paying off debts (15%), and diversifying investments (15%). In order to help clients get back on track, advisers are telling clients to pay down debt (72%), increase retirement savings (65%), increase emergency fund savings (57%), spend less money (57%), and talk with their financial adviser more often (56%) (see “Advisers Say Americans’ Savings Problems Self-Imposed“).

Time and Practice Management

When asked what the most important lessons learned about their business was from the economic downturn, Principal said a number of common themes emerged, including the importance of diversification, client relationships, and communication with clients.

Time continues to be the biggest challenge for financial advisers, the survey found. One-third said not having enough time in their day to get their work done is what frequently keeps them up at night. However, if advisers could add one more hour to their day, most would not spend it working; nearly one-third (32%) would choose to exercise, while another 26% would spend more time with family.

Advisers continue to feel more at ease with the economic climate. The survey found that about half (48%) of financial advisers said their work-related stress level is much lower compared to a year ago at this time.  More than a third (36%) said their stress level was about the same while only 16% said their stress level is much higher compared to a year ago.

The survey, commissioned by the Principal Financial Group and conducted by Harris Interactive, included feedback from a nationwide sample of 650 producing financial advisers, including independent broker/dealers, wirehouse and regional brokerage firms, insurance agencies, independent wealth management firms, banks, and independent asset management firms.