Opportunity Abounds Among Older Workers

Nearly one in four U.S. households age 50 to 59 wants more investment advice—and is willing to pay for it.

As a group, investors age 50 to 59 were most likely to say they need more financial advice, according to “U.S. Retail Investor Advice Relationships 2013: Sorting Out the Winners and Losers.” In fact, 23% of older workers surveyed for the report, from research firm Cerulli, said they would be willing to pay for more financial services.

“While investors sometimes overestimate their willingness to pay for advice, there is clearly demand among these investors for a more formal approach to ongoing advice,” says Scott Smith, director at Cerulli. Providers should not be alarmed if prospective clients show resistance when presented with formal pay structures.

When it comes to actually winning new business, the report contends investors want straight talk from financial professionals about how and why specific investment products make sense.

Consistent Communication

Cerulli says advisers must maintain consistent communication throughout the financial planning process, helping clients identify the most appropriate products and solutions for their particular investment needs.

Interestingly, an advisers’ willingness to examine client goals and explain investment analysis clearly are more important to prospective clients than past investing performance relative to the overall market.

In fact, 46% of respondents described “taking time to understand needs and goals” as “extremely important” in selecting a financial adviser. That’s compared with 37% calling historical investment performance extremely important when considering an adviser.

The report also identifies a number of challenges facing financial advisers in the investment marketplace.

Despite the industrywide effort to highlight and reduce fees, more than 60% of investors are unable to recognize or understand compensation structures. 

Another challenge is the impact of service bundling on clients’ willingness to pay for financial advice. Investors are used to receiving investment advice within asset management arrangements and are less comfortable paying for standalone financial advice. 

Advice Services

“Until the investing public more clearly understands the benefits of comprehensive advice, providers are forced to bundle their asset management and advice services, which creates the impression of free advice for clients,” explains Roger Stamper, senior analyst at Cerulli.

Other findings show advisers expect clients to demand more comprehensive financial planning services in coming years. Currently, about one-third of clients receive what their advisers consider comprehensive financial planning services, and another 27% receive modular planning usually focused on retirement accumulation. Advisers anticipate increasing their comprehensive engagements beyond 40% of clients over the next three years.

The report, currently in its fourth iteration, is an outcome of a partnership between Cerulli Associates and Phoenix Marketing International.

More on the report, including a short preview and the table of contents, is available here.