Spectrem explores important elements of the adviser-client relationship in its recent report, “Advisor Relationships and Changing Advice Requirements,” which is described in a blog post on the firm’s Millionaire Corner portal. The firm polled current 401(k) participants who use advisers for the analysis, finding many are careful and attentive in their relationships with advisers—knowing exactly what they like and don’t like when it comes to financial advisory services.
Notably, only a little more than half (56%) of all DC plan participants use a financial adviser, according to Spectrem, and the percentage drops below 50% for plan participants below the age of 36. Older 401(k) investors are more likely to have an adviser relationship, however.
Asked to explain any reason that an adviser might be fired, almost half (49%) of participants said “not returning phone calls in a timely manner.’’ Interestingly, it was the youngest segment of DC participants (36 and younger) and the oldest segment (over 65) who were most adamant about this point, with 59% in these groups saying they want to get a return phone call in a short time frame.
Spectrem says 51% of plan participants expect a call back within the same day, and 10% want a call within the hour. A little less than four in 10 (39%) think a return call the next day is acceptable, and only 10% are willing to wait more than one day, the research finds.
“Forty percent of all plan participants expect quick responses to email requests for information,” notes Spectrem’s Kent McDill, who is on the Millionaire Corner writing staff. “And 40% said they would fire an adviser who is not proactive in making regular contact.”
Looking beyond communication practices, nearly half (47%) of plan participants said they would consider firing their adviser if it seemed he was not providing good ideas and advice. When it comes to investing and stock market performance, 27% say they would fire their adviser if he underperforms in comparison to the overall stock market for too long a period.
Notably, plan participant seem to be fairly patient about lagging performance. Fully 24% would fire their adviser over investment losses over a five-year period, while 22% would fire their adviser for two years of losses. Fourteen percent were even less patient, saying a one-year loss period would be reason to consider an adviser change.
Spectrem concludes by observing 25% percent of plan participants would fire an adviser who appears not to understand the investor’s risk tolerance, and 23% said an adviser who talks only about investments and not the total financial situation would be in line to be let go.
More insights and research from Spectrem is available at www.millionairecorner.com.