DC Advisers Are Among Many Focused on Client Trust

Retail banks, active investment managers, defined contribution plan advisers, recordkeepers—they’re all focused on building client trust as a crucial element of future sales success.  

According to Cerulli Associates, trust is the foundation that will make the relationship between investors and their providers last for the long term.

This is the conclusion of a number of recent Cerulli publications, including the November 2016 issue of The Cerulli Edge – U.S. Edition. Notably, it’s not just defined contribution (DC) retirement plan advisers coming to a new appreciation of the importance of a high quality client experience—all types of financial services providers are doing this work.  

“Besides their legal obligations, providers offering additional products and service solutions must truly be in the clients’ best interest in order for the long-term relationship to be successful,” Cerulli researchers argue. “We believe that those firms that seek to align their best interests with those of their clients will substantially increase their marketshare over time.”

According to Cerulli and others, the effort of building real client trust will not just be necessary to be a top-performing firm; it will be a basic element of survival for service providers hoping to operate in the investment atmosphere anticipated for the mid- and long-term future. Investors, especially those under age 40, are more likely to prefer a consolidated relationship than to maintain a variety of relationships, Cerulli explains. There will also be far more scrutiny about conflicts of interest and proving value for service. Thus firms that are successful in gaining client trust will clearly be in an advantageous position.

Scott Smith, director at Cerulli, says these emerging investors “are likely to need an expanding service set, but some elements of their relationship could be loss leaders from the near to medium term.”

“Banks, insurance agents, retirement recordkeepers, certified public accountants, and direct brokerage platforms all vie for the central role in investors’ financial lives,” Smith concludes. “Rather than trying to serve any particular product niche, providers across the industry seek more opportunities to serve as the hub of their clients’ entire financial existence.”

Further complicating the picture, Cerulli’s research predicts investors, even in this new environment, will for the most part either remain unaware of the vast majority of available products or services—or they may not believe that their current providers are truly qualified to serve them in additional areas.  

“Over the past decade, a number of financial services providers have attempted to enter the ‘comprehensive wealth management’ segment that previously addressed only distinct pieces of households’ financial needs,” Smith says. They have met greater and lesser amounts of success, but nonetheless Cerulli feels provider firms “must embrace the opportunity to expand their reach or risk losing their place in investors’ financial lives altogether.”

Information on obtaining Cerulli Associates Research is available here