For Advisors, Connecting with Investors Early On Is Critical for Sustained Growth
May 12, 2022 — Boston
Investors are leaving the Advice Seeker stage early and are reluctant to change providers later in life
New research from Cerulli finds many investors reach an inflection point in their 50s and choose between acting as Self-Directed investors or outsourcing responsibility to an advisor. For advisors, this means connecting with investors before this decision is critical for building and sustaining a long-term relationship with clients, according to the latest Cerulli Edge—U.S. Retail Investor Edition, 2Q 2022.
Cerulli classifies investors across the following behavioral advice continuum:
- Passive Investors: "Set it and forget it" investors who are not highly concerned with a need for advice or services
- Self-Directed: Independent, self-sufficient investors who are highly hands on with their finances and are not interested in paying for advice
- Advice Seekers: A hybrid segment of investors who have the DIY characteristics of the Self-Directed but are actively looking for more/new advice and insight
- Advisor-Reliant: Investors who are heavily dependent on the use and involvement of traditional financial professionals, with little self-guided decision making
In the research, Cerulli identifies a substantial increase in the Advisor-Reliant and Self-Directed segments as investors move into their 50s. By age 50, many have had enough experience with their current provider to turn over full control, resulting in a jump in the Advisor-Reliant category to 37% among those ages 50 to 59 and, subsequently, to 52% among those in their 60s.
Others choose to go off on their own, resulting in a jump in the Self-Directed segment to 17% among those ages 50 to 59, and, subsequently, to 18% among those in their 60s, and 20% among those in their 70s. “Investors in their 50s are at a crossroads,” says Scott Smith, director. “These former Advice Seekers can either turn over control their trusted advisors or use the knowledge they’ve captured over the years to take a more active role in the ongoing management of their portfolios long-term.”
To avoid losing clients, it is important that advisors build relationships with investors earlier on in their investment journey. According to Cerulli’s research, Advice Seekers peak at 59% between ages 30 and 39, and subsequently drop to 48% between ages 40 and 49, suggesting an opportune time for advisors to create a relationship with these investors. “These investors want one-on-one help but likely have yet to accumulate the assets to drive suitors to their doors,” says Smith. “It’s imperative to create valued relationships with these investors as they mature into optimal clients.”
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