Reliance on Financial Advisors Blooms as Retirement Nears
August 23, 2023 — Boston
Firms and practitioners hoping to gain share in the retiree market must highlight their support and commitment to clients
Investors within five years of anticipated retirement seek advisors with access to a strong suite of support services and express an affinity for brands familiar to them, according to the latest Cerulli Edge—U.S. Retail Investor Edition.
As investors near retirement, Cerulli observes notable growth in the proportion of investors that are best categorized as advisor-reliant. Once households are within five years of retirement, their share of the advisor-reliant market jumps from 27% to 46%, and then to 57% once they are within one year of retirement. These investors are looking for guidance and become heavily dependent on the use and involvement of advisors.
With this increased need comes a shift in investors’ preferred advisor type. At the point of retirement, the preference for an advisor affiliated with a national firm increases from 39% to 45% while the no preference option drops from 30% to 20%. This underscores the importance investors place on the reliability of their advisory relationships as they enter this stage of life.
Investors reinforce this preference when considering their best source of investment expertise. According to the research, 39% of investors identify dedicated home-office teams as their preferred source of portfolio management, followed by individual advisors at 29%. This aligns with Cerulli’s general best-practice recommendation to have client-facing advisors focused on ongoing discovery, engagement, and communication to help identify key factors affecting portfolios, while also ensuring that implementation is managed by separate dedicated resources.
Taking all these factors into consideration, Cerulli believes it is vital for firms and practitioners hoping to gain share in the retiree market to consistently highlight both the support resources at their disposal and their commitment to prioritizing clients’ best interests. “While most investors have little familiarity with the term ‘fiduciary,’ this type of relationship is the core of client preference,” says Scott Smith, director. “Communicating this commitment believably in terms that clients understand is vital to ongoing client acquisition, especially as prospects approach their anticipated retirement date,” concludes Smith.
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