Succession Plans Loom Large in Adviser Practices, Says Latest Cerulli Report

Cerulli Associates, an international research and consulting firm, recently published the latest Cerulli Edge—U.S. Advisor Edition, which analyzes the trends impacting financial advisers and product providers.

In the report, Cerulli stated that 55% of advisers consider new client acquisition a challenge, and 29% find it difficult to build multigenerational client relationships. The report claims that, while 80% of clients report being satisfied with their primary financial adviser, many unadvised investors may still feel hesitant as they are often unsure of what a potential adviser relationship involves. Most unadvised investors do not believe they will receive enough value for a relationship to be worthwhile, and unadvised investors often view adviser-client relationships as lacking transparency and perceive associated costs as excessively high.

“[Transparency is] an essential aspect of service for advisers. Consistency in communication, being upfront about any substantial changes to a client’s portfolio and being explicit about costs are important discussion points,” said Noah Serianni, analyst. “For affluent investors, transparency is the most important factor when choosing an adviser, even more so than demographic or performance-based considerations.”

The report stated that many unadvised investors are unsure about the price of hiring an adviser and often perceive them as too expensive. There is also confusion among those who use advisers about how they are compensated; one in four advised clients do not understand their fee structure, and one in five believe they do not pay their adviser at all.

“Despite these concerns, most are willing to pay for advice,” added Serianni. “According to Cerulli, 59% of affluent respondents are willing to pay for financial advice, up from 45% in 2015. Increasing cost transparency will help advisers retain existing clients who value openness and honesty from their advisers while attracting new clients seeking someone they can trust.”

Cerulli also reported that marketing could also play a key role for advisers and suggested that advisers market their transparency, low cost and fee options to reluctant investors. According to the report, this increases visibility and helps drive unsolicited clients to contact firms directly, which is how nearly one in five clients begin their relationship with their primary adviser.

“Integrity and openness go a long way in the minds of hesitant investors, and advisers who prioritize and effectively market these aspects of their service will find success attracting and retaining clients,” Serianni concluded.

Additionally, the report stated that the projected adviser headcount for 2024 is expected to be 285,800, a 0.9% increase from 2023. At more than 48,000, more advisers are expected to be operating in the independent registered investment adviser space than any other channel.

This latest report from Cerulli follows closely on another publication in which the company stated that 57% of advisers choose their asset managers based on client service quality.

Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business.

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