In Practice November 25, 2007

Investors Looking for Advisers to Provide Security

Referrals and a need for reassurance that savings will last through retirement are the main way and reason clients come to a financial adviser.
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At least that’s what advisers think. According to a recent Cerulli Edge report, referrals rank as the most important reason clients choose to work with an adviser (86.1% of advisers say clients put a high importance on referrals). The report notes that there are two primary sources of referrals for financial advisers: referrals from existing clients and referrals from a well-developed professional network. In fact, “for best-practice advisers that are addressing higher-net-worth clients, a developed referral source is often a common hallmark of their practice,” the report notes. Following referrals, the other high importance reasons are:

  • the adviser’s approach to financial planning (73.2%),
  • his personality (71.4%), and
  • amount of experience (61.4%).

Reasons advisers say clients put a moderate importance on include: cost (59.2%), educational background (57.7%), firm’s reputation (56.5%), and professional association affiliation (52.8%).

Why Investors Look for Advisers

Retirement concerns rank highly on the reasons advisers believe their clients sought them out. In fact, three of the four most common reasons advisers list pertain to retirement:

  • making sure money will last through retirement (88.9%);
  • feeling a professional would do a better job managing my finances (75.3%);
  • getting close to retirement (74.1%); and
  • rolling over a retirement plan (69.1%).

“As the Baby Boomers move closer to retirement, advisers must ensure that they are well positioned to provide the retirement advice these clients demand,” the report says.

Once the client begins working with the adviser, according to advisers, client concerns that can be solved with investment management and prudent asset allocation are the most common concerns for retail clients. Advisers say the issues with the highest importance are: increasing clients’ current asset level (74.3% of advisers say that is a highly important issue to clients); maintaining clients’ existing lifestyle (68.9%); managing investment risk (54.1%), and maintaining current asset levels (49.3%). Advisers say that affording healthcare, saving for educational expenses, and managing debt are issues of only somewhat importance to their clients (52.0%, 52.7%, and 63.9%, respectively, of advisers say those issues are somewhat important to clients).

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