Upload
the-401k-study-group
View
590
Download
1
Tags:
Embed Size (px)
DESCRIPTION
This paper represents the first of three research papers examining how clients, business models and advisory firms are expected to evolve over the next decade. We hope you find our research to be insightful, informative and engaging – and we hope it provides you with another tool to enhance your practice, build your business and make meaningful connections with a future generation of clients.
Citation preview
The Future of AdviceBusiness models and services for the next generation
In partnership with
Table of contents
About this research series ....................................................................4
Introduction: Who is the client of the future? ........................................6
Figure 1: Investors prefer to work with full-service
advisory firms ........................................................................8
Figure 2: Investor respondents by age ......................................9
Overview of investor attitudes ............................................................11
Figure 3: Investor marital status, by gender ............................. 11
Figure 4: Investor employment status, by age .......................... 12
Figure 5: Investable assets, by gender ....................................12
Wired at every age .............................................................................14
Figure 6A: Investor device usage............................................ 14
Figure 6B: Investor smartphone use, by age ............................ 14
Figure 7: Social networks used for professional purposes .......... 15
Figure 8A: Primary sources of investment and financial
information, by investor age ................................................... 16
Figure 8B: Primary sources of investment and financial
information, by investor gender .............................................16-
Figure 8C: Primary sources of investment and financial
information, by investable assets ............................................ 17
Portrait of a client ..............................................................................18
Figure 9: Investors and Advisers: which services will prove
most valuable in 5 years? ...................................................... 18
The Future of Advice
An adviser’s value proposition ............................................................20
Figure 10: How investors use their adviser’s website, by age ..... 21
Figure 11: How investors use their adviser’s website,
by investable assets .............................................................22
Portrait of a DIY investor ....................................................................23
Figure 12: Reasons investors do not use a financial adviser,
by investable assets ............................................................. 24
Figure 13: Reasons investors do not use a financial adviser,
by gender ............................................................................ 24
Figure 14: How DIY investors invest their money, by age ...........25
Figure 15: DIY Investors: which services would provide
the most value? ...................................................................27
Figure 16: Large majority of DIY investors are open to
working with a financial adviser ..............................................28
Conclusion and action items ...............................................................29
Acknowledgements ............................................................................30
The Future of Advice
4 The Future of Advice
About this research series
Before we established our research roadmap for 2014, we paused to ask ourselves a series of critical questions here at InvestmentNews Research. Most importantly, several years after acquiring the research and benchmarking studies from Moss Adams LLP, how have we both succeeded and failed to enable a broader universe of financial advisers to take their businesses to new heights?
From there, our opportunities and objectives became clear. Our emphasis and expertise, at its core, has focused on the business of your business. Structure, staffing, compensation, financial performance – the fundamentals of building a vibrant and viable business. The core of your business, however, is universal and singular: The client.
This research series represents our first attempt to better understand the needs and demands of your current and prospective clients, both now and over the next decade. We partnered with several of our sister publications here at Crain Communications - Crain’s New York, Crain’s Chicago, Crain’s Detroit and Crain’s Cleveland Business - to gather responses from roughly 1,000 of their readers. We surveyed them to better understand their needs for investment and financial advice. We then cross-referenced with a companion survey of roughly 500 advisers to see how your businesses and plans are truly positioned for future growth, relative to the demands of investors of all needs, ages, and overall levels of wealth.
With the help and support of Cambridge Investment Research, a truly thoughtful and strategic partner on several of our core research projects, we proudly present “The Future of Advice” series. This paper represents the first of three research papers examining how clients, business models and advisory firms are expected to evolve over the next decade. We hope you find our research to be insightful, informative and engaging – and we hope it provides you with another tool to enhance your practice, build your business and make meaningful connections with a future generation of clients.
Mark Bruno
Associate publisher
InvestmentNews
About this research series (cont’d)
We all recognize that Boomers have been a driving force for change over the last
several decades, and there is every expectation their sweeping impact will continue
for at least another decade and more. But, at the same time, the Next Gen is
stepping up and staking their claim on what is today, and what will be tomorrow.
The future of advice is critical due to advances in technology, communications,
and lifestyle preferences. For lasting success, it is not enough to focus 12 months
out and we must take a long-term view on the opportunities we see in the coming
decades.
In 2009, we launched Cambridge’s New Century Council, a group of 45 and
under advisors committed to helping us focus on the future. These New Century
Council members bring energy, creativity, and clarity that is integral to assessing
and serving advisors’ and investors’ needs around solutions such as social media,
mobile and e-signature strategies, in addition to business and service models.
We as industry leaders must be eager to listen and learn from all generations of
investors and advisors.
For example, we should not be threatened by the widely discussed concept of the
‘robo advisor’ and instead embrace this innovation with the primary focus on how
to best integrate this automation into our technology platforms that serve clients.
Robo-advisor technology should augment our current and future advice model;
and the results of this research will demonstrate investors do or will value the
importance of professional financial guidance.
Please enjoy the first of a three-part series on the ‘Future of Advice’ titled
‘Business Models and Services for the Next Generation’. My goal for leaders of
the industry is that we take advantage of this insight and adapt our business and
service models with an eye towards the future.
Amy Webber
President
Cambridge Investment Research, Inc.
Business models and services for the next generation 5
6 The Future of Advice
As technology changes the way investors
work, communicate and invest, new
opportunities for advisers are emerging.
During the past 40 years, the world of personal saving and investing
has undergone a complete overhaul. In the 1970s, John Bogle
marketed the first no-load index fund and discount brokers started
overturning the old-school brokerage system; the ’80s brought us
mutual fund “supermarkets,” Individual Retirement Accounts and
401(k) plans. The opening of the Internet to public use in the ’90s
took retail investing online, and the repercussions are still working their
way through the industry. The 21st century began with crises—the tech
bust, the terror attacks of 9/11 and the 2008-9 financial meltdown—
but it also brought dramatic innovations in mobile computing, social
media and communications. Now, the way individuals research and
trade investments, communicate with advisers and benchmark their
performance has been transformed—and their expectations are evolving
in a way that could create exciting new opportunities for advisers.
We are living in a historical period of tremendous prosperity—and
both investors and advisers know it. But that prosperity is yoked
to greater personal responsibility for the future. Clients who once
could count on Social Security, Medicare and pensions to serve
as the foundation of their retirement plans are reminded each
day how uncertain – and unreliable – these institutional pillars
could become. Personal saving and financial planning have
become the primary sources of wealth accumulation – and as
assets grow, investors understand that they need guidance. All
of this bodes extremely well for the financial advice industry.
So at InvestmentNews Research, we wondered: How are clients’
needs, goals and plans evolving? Who are the clients and prospects
of the future—and how can advisers best meet their needs? To find
out, we surveyed nearly one thousand investors across the United
States on their expectations from financial advisers and their needs
for planning, investing, saving and financial education. Included
Who is the Client of the Future?
Business models and services for the next generation 7
in the survey sample are 490 “do-it-yourself investors”; we were
curious to see what services or circumstances might convince them
to turn to an adviser for help. We also gathered survey responses
from more than 500 advisers to examine their expectations and
plans for developing their businesses, both now and in the future.
This comprehensive survey gave us the opportunity to test
investors’ and advisers’ assumptions about their future needs
and goals, and also to seek out how that matched up—or
didn’t. Our findings were surprising, exciting and occasionally
revealed some disconnects that are important to explore.
We will examine the results of our research survey in three
separate reports, all part of the “Future of Advice” series. This
one, examining clients’ evolving profiles as well as their desires
and expectations, is the first. The second report will cover how
advisers are planning to develop and position their practices for
future growth, while the final report will pull the Investor and
Adviser findings together to recommend Avenues for Growth.
Together, the three reports will provide essential insights for
building a practice with long-term growth potential – and an
increasing, meaningful and established enterprise value.
The Expanding Need—and Demand—for Advice
Before moving into the details of the investor survey, here’s an
outstanding statistic: 54% of clients and 54% of do-it-yourself
investors said that, five years from now, they would need
more “direct, personalized and professional advice.”
Among those investors, more than 70% indicated that while they do
not currently use a financial adviser, they would consider hiring one in
the near future.
This is great cause for optimism for the financial advice industry. As
individuals have been armed with scores of self-help tools and web-
based personal financial planning resources in recent years, many
advisers have cited the “rise of the machines” as a potential threat
to the traditional financial advice business. Our research has found,
8 The Future of Advice
conclusively, that while the type of advice and the delivery of these
services to individuals has and will continue to change, the demand
for personal financial advice and one-on-one advisory services has
the potential to increase significantly over the next five years.
Over the next decade, those advisers who best attempt to
understand the changing concerns, interests and behaviors of the
investors who need—and desire—personalized financial advice and
support are most likely to grow the fastest. They are positioning
themselves to evolve and emerge as the industry’s elite.
When asked what characteristics they valued most about an adviser,
investors were most likely to choose the “ability to translate my
personal needs into a strategy.” That is a high bar, but it’s one that
advisers can meet—and it certainly differentiates them from online
portfolio-management services. The survey also found that clients
want advice-oriented services, particularly retirement income planning
and debt management, in addition to pure portfolio management.
Additional Key Findings
This study verifies, with extensive data, many ideas that have been
percolating through the world of financial advice. In fact, the survey
findings pointed clearly to a set of best practices for advisers and
the industry.
1) Clients Want an Expanded Service Model. Investors in all age groups
say that they want a full-service relationship, with access to financial
planning, investment, tax and estate advice from a single source. Just
10% of investor respondents voiced a preference for a solo practitioner.
19.6%
43.6%
10.1%
29.6%
0%
10%
20%
30%
40%
50%
Figure 1 Investors prefer to work with full-service advisory firmsInvestors: What type of advisory firms do you prefer to work with?Advisers: How many principals does your firm have?
A solo practitioner/1 principal
An “ensemble” firm/2-10 principals
A full-service advisory firm/11+ principals
Investors Advisers
36.8%
48.7%
Business models and services for the next generation 9
2) Clients Want Account Access from Anywhere, at Any Time.
Overall, 83.8% of investors use a smartphone, including 69.3%
of investors over age 65. It’s hardly a stretch to think that, as we
go forward, clients will expect to use their phones to access their
investment accounts.
In fact, among investors under 45—the age group that sets the agenda
for technology use—66% say they want their advisers to offer more
services online in the future. For these investors, “online” means on
their phones as much as on a laptop or desktop. These same younger
clients expect that, in the future, they will communicate with their
advisers by text message, the same way they communicate with family
and friends today.
3) Clients Want You to Help Them Save. For all the media hectoring about
how Americans don’t save, the fact is that many do, and they are seeking
your help to do it better. Nearly 36% of respondents said they want help
with saving for retirement, and 25% of respondents want you to help
them budget. That’s a great sign for the future.
Clients of the Future—Going Virtual
When looking at clients, one of the goals of this study was to see how well
their perceptions and expectations for an advisory relationship matched
those of advisers. In several ways, they did—advisers and investors share
several basic values, such as the primacy of personal relationships and
referrals. But there are some crucial differences. For one thing, clients
expect much more technology-based services than advisers seem to be
prepared to provide—an observation borne out by several recent studies.
10.1%
0%
5%
10%
15%
20%
25%
30%
35%
Figure 2 Investor respondents by age
Under 35 35-44 45-54 65+
Total = 994
55-64
28.5% 29.1%
12.1%
16.3%13.9%
10 The Future of Advice
This report carefully analyzes investor preferences to help clarify what
investors want, what venues they use to seek out information, the
services they prefer, and adviser characteristics they value most.
In short, the investors we surveyed are among the wealthy or emerging
wealthy crowds. Regardless of age, they are mobile, tech savvy, wired
and in pursuit of a path to increase their knowledge of investing and
personal finance.
Business models and services for the next generation 11
OVErVIEW OF INVESTOrS
Roughly 1,000 individual investors took part in the study. Of the 994
respondents, 43% were age 55 or older; 12.1% were under 35. A little
more than half, 53.5%, said they were male, and 44.3% female. (The
remainder did not disclose their gender.) The majority, 63%, were
married or in a domestic partnership; 20.2% were single, 13.4%
were divorced or separated and 1.8% were widowed. Female survey
respondents were far more likely to be unmarried: 27.6% were single,
compared to 14.3% of men; 17.7% were divorced or separated, vs.
10.2% of men; and 3.1% were widowed, vs. 0.6% of men.
They were also somewhat younger than the men: 14.8% of
the female respondents were under age 35, as were only
10.1% of the men. When asked their impressions of financial
advisers, the respondents were divided into two groups: those
who had a current engagement with an adviser (49.8%), and
those that managed their finances themselves (49.1%).
0%
10%
20%
30%
40%
50%
60%
70%
80%
Figure 3 Investor marital status, by gender
Single,never married
Married ordomestic partnership
Widowed SeparatedDivorced
14.3%
51.2%
0.6%
27.6%
74.2%
3.1%9.1%
15.5%
1.1% 2.2%
Men Women
12 The Future of Advice
The respondents were prosperous, with 24.6% reporting that they
had $1 million or more in investable assets. Another 38.6% had
$250K-$999K to invest. They were also well-educated, with
83.4% having a Bachelor’s or more advanced degree. 58.2% said
they were employed full-time, 26.2% were self-employed, and
a mere 6.4% were retired. Only 34.8% of clients age 65-plus
reported being retired; 29.3% said they were self-employed
and another 27.9% that they were employed full-time.
Although more than half of investors described themselves
as “somewhat knowledgeable” about finances and investments,
certain groups were much more likely to say that they “need
education,” such as investors under age 35 (37.4%) and women
Figure 4 Investor employment status, by age
Under 35 35-44 45-54 55-64 65+
0% 10% 20% 30% 40% 50% 60% 70% 80%
27.5%55.0%
65.4%66.0%
76.7%
4.2%2.8%
7.2%
3.7%5.0%
0.7%0.0%
0.0%
0.6%4.2%
1.7%3.5%
0.7%
4.3%2.5%
4.5%1.1%
34.8%
0.0%0.0%
32.5%26.5%
29.7%
24.7%10.0%
Employed full-time
Self-employed
Employed part-time
Student
Unemployed
Retired
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Figure 5 Investable assets, by gender
Over $10M $5M-$10M $1M-$4.9M Under $250K$250K-$499K$500K-$999K
2.2%
23.6%
14.2%
1.6%5.4%
1.8%
12.3% 13.5%
26.4% 25.6%27.7%
40.9%
Men Women
Business models and services for the next generation 13
overall (27.6%). Interestingly, significant numbers of clients at
both ends of the wealth spectrum also wanted to learn: 15.8% of
decimillionaires and 19.2% of those with less than $250K to
invest chose “needs education” as their self-assessment.
14 The Future of Advice
WIrED AT EVErY AGE
When asked about their personal use of technology, investors
proved that mobile digital adoption is now virtually complete. For
example, 83.8% of investors use a smartphone—and that total
includes 69.3% of investors over the age of 65. Investors are now
more likely to use a laptop computer (83.2%) than a desktop
model (63.1%), including those age 65-plus (78.1% use laptops
vs. 67.9% who use desktops). In addition, 63.2% of investors have
tablets—among them, 56.9% of respondents age 65-plus. Investors
of all ages are most likely to use their laptops to gain access to
their financial account information (72.3% vs. 54.8% who use a
smartphone), but among investors under 35, the two devices are
used almost equally (80.8% use laptops, 82.5% use smartphones).
Use of social media is pervasive as well, with LinkedIn reigning
supreme, at least for business: 81.3% of respondents use LinkedIn
professionally, including 71% of respondents over 65. The next
most popular outlet was Facebook: 37.4% of respondents use it for
Use regularly Use to access financial account information
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Figure 6A Investor device usage
Cellphone(not a smartphone)
Smartphone Tablet LaptopDesktop (PC)
22.1%
63.2%
43.3%
7.1%
83.8%
54.8%
63.1%57.5%
83.2%
72.3%
Use smartphone on a regular basis Use smartphone to access financial account information
0%10%20%30%40%50%60%70%80%90%
100%
Figure 6B
Under 35 35-44 45-54 65+55-64
Investor smartphone usage, by ageInvestors over 55 half as likely as those under 45 to access financial information on their smartphones
95.8%
83.5% 85.7%
56.4%
94.4%
71.9%78.2%
42.0%
69.3%
35.8%
Business models and services for the next generation 15
professional purposes, including 29.7% of 65-plus respondents.
Twitter was a close third, with 26.6% of respondents. When asked to
choose which social media outlet would become more important to
their professional lives over the next five years, 44.6% of investors
choose LinkedIn, 10.6% chose Twitter and 7.6%, Facebook.
The real differences in social media usage occurred among newer, less
ubiquitous social media outlets—Google+, Instagram and Pinterest—
which are popular among younger clients and women overall, who,
in much greater numbers than men, have wholeheartedly embraced
social media. Women and men used LinkedIn and Twitter equally; but
women were far more likely to turn to Facebook (41.2% of women
vs. 34.3% of men), Instagram (11.3% of women vs. 6.5% of men)
and Pinterest (12.2% of women vs. 4.7% of men). They were also
somewhat more likely to use Google+ (21% of women vs. 18.1% of
men) and blogs (18.6% of women vs 14.2% of men).
Key takeaway: This is a clear signal to advisers who want to reach
out to female investors, who are still an underserved group: You
can find them on social media, and particularly through images
or infographics posted to Facebook, Pinterest and Instagram.
Although investors turn to social media for personal and professional
interchanges, when it comes to investment information, they are
more traditional. Among investors of all ages, the most popular source
was financial newspapers and news websites (48.9%)—even for
the under-35 cohort. The wealthier the investor, the more marked
the preference. The second most popular source of information was
financial institutions (35.1%), followed closely by a personal financial
adviser (34.1%), except among individuals with $10 million or more
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Figure 7 Social networks used for professional purposesInvestor respondents, by gender
LinkedInFacebookTwitterGoogle+Pinterest BlogsInstagram
8.9%
6.5% 11
.3%
8.3%
4.7%
12.2
%
16.3
%
14.2
%
18.6
%
19.6
%
18.1
%
21.0
% 26.6
%
26.1
%
26.9
% 37.4
%
34.3
% 41.2
%
81.3
%
82.3
%
80.1
%Men Women All
16 The Future of Advice
to invest—they are dedicated followers of financial television (36.8%).
Women are less likely than men to read the financial news or watch
financial television; but they are more likely to rely on financial
institutions, a financial adviser or friends and family for their
financial education.
0%
10%
20%
30%
40%
50%
60%
Figure 8A
Financialnewspapers or news websites
Financial institutions
(bank,401(k) provider,brokerage firm)
Personalfinancial adviser
Personalfinance websites
Financialtelevision news
networks
Socialnetworks
Friends,family
Primary sources of investment and financial information, by investor age
46.2
% 50.6
%50
.4%
47.7
%48
.6%
27.7
%30
.0% 35
.8%
38.7
%39
.1%
13.4
%26
.3% 33
.7% 39
.7%
50.7
%
12.6
% 16.3
%19
.5%
15.0
%14
.5%
24.4
%25
.0%
16.7
%18
.1%
10.1
%
26.9
%15
.6%
9.9% 11
.1%
10.9
%
10.1
%8.
8%2.
5%1.
7%0.
7%
Under 35 35-44 45-54 55-64 65+
Men Women
0%
10%
20%
30%
40%
50%
60%
Figure 8B
Financialnewspapers or news websites
Financial institutions
(bank,401(k) provider,brokerage firm)
Personalfinancial adviser
Personalfinance websites
Financialtelevision news
networks
Socialnetworks
Friends,family
Primary sources of investment and financial information, by gender
56.6%
39.8%
32.6%35.5%
37.6%33.1%
18.2%13.6%
19.9%16.1%
9.7%
18.1%
2.6%5.4%
Business models and services for the next generation 17
Over $1M $250K - $999K Under $250K
0%
10%
20%
30%
40%
50%
60%
70%
Figure 8C
Financialnewspapers ornews websites
Financialinstitutions
(bank,401(k) provider,brokerage firm)
Personalfinancialadviser
Personalfinance
websites
Financialtelevision news
networks
Socialnetworks
Friends,family
Primary sources of investment and financial information, by investable assets
59.9
%
50.0
%
37.8
%
26.3
%
38.9
%
40.9
%
32.0
%
35.2
%
37.0
%
13.4
% 21.2
%
17.9
%
20.6
%
14.2
%
15.5
%
10.9
%
11.7
% 17.0
%
3.2%
2.3% 6.
0%
18 The Future of Advice
POrTrAIT OF A ClIENT
Those individuals who do use a financial adviser are likely to turn to
one or two experts and no more: 63.5% use only one adviser, and only
6% of respondents used 3 or more.
Why do they use an adviser and what do they value most about the
services they receive? Interestingly, clients do not consider investment
management to be the most important service they receive. That honor
fell to retirement income planning: 44.3% of clients put it on their list
of the five most important services. Closely behind came brokerage
(43.1%) and financial plan development (41.6%). Only then did clients
list investment management, both discretionary and nondiscretionary
(39.5% combined). Estate planning and insurance planning, which
ranked among advisers’ top five services, fell lower down the investor
list. Estate planning was a top service for only 25.9% of clients,
compared to 35.6% of advisers, and insurance (life, health, disability
and/or long-term care) planning was a top priority for only 14.3% of
clients, vs. 32.3% of advisers.
Investors: Which services will be most valuable over the next five years?
Advisers: Which services will present the largest growth opportunity over the next five years?
Figure 9
Investors Advisers
Estate planning
Retirement saving
Cash flow planning
Brokerage
Bill payment
Insurance planning
0% 10% 20% 30% 40% 50%
Retirement income planning
Investment management
Financial plan development
Income tax planning
Investment consulting (strategy or manager
selection)
8.6%
14.7%
25.4%
15.0%
5.9%
19.8%
18.8%
22.0%
23.1%
22.2%
39.2%
23.2%
38.9%
9.1%
1.8%
12.6%
11.8%
18.4%
10.4%
8.6%
11.6%
48.5%
Business models and services for the next generation 19
Help with saving for retirement was a priority for 35.6% of
respondents, especially among those with less than $1 million
to invest (45% of all respondents)—in other words, the vast
majority of Americans. Even 27.8% of clients age 65-plus still
valued retirement saving. Even a few decimillionaires, whom you
would think had no problems coming up with extra money, put
retirement saving on their top-priority list for the next five years.
Key takeaway: Here, too, is a clear signal for advisers: Your clients
have figured out that they need to save more, and not count
on investment returns alone. Helping them build savings is a
powerful way to differentiate yourself that clients value highly.
Clients also want to access advisers’ services through their website,
and 73.3% of clients are already doing so. In addition, 51% of
clients expressed the desire to avail themselves of more online
services during the next five years. Clients younger than 45, of
course, were more likely to say they wanted “a lot more” online
access than their older counterparts. But even among 65-plus
clients, 34.2% wanted more online services in years to come.
20 The Future of Advice
AN ADVISEr’S VAluE PrOPOSITION
Clients are fairly uniform in their assessment of what makes an
adviser the one for them. Most important is a referral from a family
member or friend (24.5%), followed by being able to enjoy working
together (22.6%). Credentials and designations rank third (19.7%),
followed by an adviser with a particular specialty (10.3%).
The younger the client, the more important the first two qualities become;
as clients pass the age of 45, credentials gain importance. When asked
how they found their current adviser, 54.4% reported that they acted on
a referral from a friend or family member. Another 27.3% of clients acted
on a referral from an attorney, accountant or other professional.
Once the relationship has been established, clients across the board—
regardless of age or asset level—say that characteristic of their adviser
they value most, beyond the services he or she provides, is the “ability
to translate my personal needs into a strategy,” followed closely
by “understanding of investment/financial environment.” The latter
seems to be table stakes—without understanding the investment and
financial environment, how could one practice as an adviser? But the
former takes the understanding and makes it personal, and relatable.
In addition, 54% of clients assumed that they would need more
“direct, personalized and professional advice” in the next five years.
If you were looking for a mission statement for your website, here it is.
The standards for personalized advice, however, are rising, courtesy
of the Internet. Clients have been taught to expect extreme
personalization. They are accustomed to tailored Facebook feeds and
Google searches, and to advertisements determined by their online
consumption habits. This is one more area where technology can be
brought into play—advisers who make heavy use of their CRM can
ensure that each client gets the highly personalized services he or she
prefers, down to how many sugars for their coffee during an office visit.
When asked if they want to work with a solo practitioner, an ensemble
practice or a full-service shop with financial-planning, tax, legal
and other experts available to them, 48.7% chose full-service.
This is bad news for the 21% of advisers in a solo practice.
Key takeaway: The third clear signal to advisers: You have the
opportunity to demonstrate your value by showing that you really
understand the client. But you must be able to deliver highly
If you were looking for
a mission statement for
your website, here it is.
Business models and services for the next generation 21
specialized advice and a range of services—and if the requisite experts
aren’t in your office, you’ll need to team up with allied professionals.
Get On Board, Get Online
For an adviser today, a website is a necessity, not an option. Nearly
80% of clients overall, and 86.4% of clients age 65 or over, did
know about their adviser’s website. And 36.5% of clients report that
they use their adviser’s website to receive financial planning advice
or financial services, in addition to retrieving account information.
Financial planning firms obsess about security, and clients are
benefiting from the results: 75.6% say they are comfortable with
accessing personal financial data online, and 38.3% say they can
access information from their adviser on their smartphone.
The way clients used their adviser’s website varies by age, but not in the
ways most people assume. Clients age 65+ were most likely to check
their account value online (77.4%) and the under-45 set least likely
(62.1%). The senior group was also most likely to keep all its financial
information in one place (47.2%) and read advisers’ blogs, newsletters
or planning updates (41.5%). The under-45 group was less engaged.
Although clients at all levels of wealth do engage online, mass-affluent
clients—those with assets from $500K to $999K—were the ones
most likely to use the widest variety of online services: 83.9% used
Figure 10 How investors use their adviser’s website, by age
Under 45 45-55 55-64 65+
0% 10% 20% 30% 40% 50% 60% 70% 80%
Look up my account value
Read my adviser’s blog, newslettersor financial
planning updates
Maintain a “vault” with important papers
and reports
9.4%8.8%
8.3%8.6%
5.7%3.3%
11.1%13.8%
9.4%11.0%
25.0%15.5%
26.4%24.2%
31.9%12.1%
41.5%27.5%
36.1%24.1%
47.2%45.1%45.8%
39.7%
77.4%63.7%
73.6%62.1%
Review all of my financial information in one place
Schedule meetings with my adviser
Send messagesto my adviser
Update beneficiary information
Figure 10 How investors use their adviser’s website, by age
Under 45 45-55 55-64 65+
0% 10% 20% 30% 40% 50% 60% 70% 80%
Look up my account value
Read my adviser’s blog, newslettersor financial
planning updates
Maintain a “vault” with important papers
and reports
9.4%8.8%
8.3%8.6%
5.7%3.3%
11.1%13.8%
9.4%11.0%
25.0%15.5%
26.4%24.2%
31.9%12.1%
41.5%27.5%
36.1%24.1%
47.2%45.1%45.8%
39.7%
77.4%63.7%
73.6%62.1%
Review all of my financial information in one place
Schedule meetings with my adviser
Send messagesto my adviser
Update beneficiary information
22 The Future of Advice
their adviser’s website to check their account value; 45.2% reviewed
aggregated information about all their accounts; 29% sent messages
to their adviser via the site; and 22.6% had used it to update
beneficiary information. Another 22.6% read the adviser’s blog,
newsletters or planning updates.
In the future, clients of every category expect to enjoy significantly
increased online engagement, from scheduling meetings online
(41.6%) to transferring funds (63.5%), paying bills (41.4%) and
signing and sending secure electronic documents (45.4%). The
youngest clients, who use adviser websites the least, predict that
they’ll catch up with their older, and presumably wealthier, peers.
Key takeaway: Here is the fourth clear signal: Beefing up your ability
to deliver services online will be a business imperative. Simply offering
digital delivery may not be a differentiator—unless of course you
don’t offer online services—so you may as well start now and begin
developing a track record and strategy for your future platform.
Figure 11 How investors use their adviser’s website, by investable assets
Under $250K $250K - $999K Over $1M
0% 10% 20% 30% 40% 50% 60% 70% 80%
Look up my account value
Send messages to my adviser
Update beneficiary information
Schedule meetings with my adviser
Review all of my financial information in one place
Read my adviser’s blog, newsletters or financial planning updates
Maintain a “vault” with important papers and reports
58.1%
71.7%70.6%
43.5%
44.4%43.1%
32.3%
31.3%31.2%
17.7%
16.2%23.9%
8.1%
9.1%9.2%
9.7%
8.1%6.4%
16.2%
35.5%23.9%
Figure 11 How investors use their adviser’s website, by investable assets
Under $250K $250K - $999K Over $1M
0% 10% 20% 30% 40% 50% 60% 70% 80%
Look up my account value
Send messages to my adviser
Update beneficiary information
Schedule meetings with my adviser
Review all of my financial information in one place
Read my adviser’s blog, newsletters or financial planning updates
Maintain a “vault” with important papers and reports
58.1%
71.7%70.6%
43.5%
44.4%43.1%
32.3%
31.3%31.2%
17.7%
16.2%23.9%
8.1%
9.1%9.2%
9.7%
8.1%6.4%
16.2%
35.5%23.9%
Business models and services for the next generation 23
POrTrAIT OF A “DIY” INVESTOr
Among those investors who do not use an adviser, only 36% are
former clients, and in the under-35 group, only 16.7% are former
clients. The rest—the majority—have never engaged a financial
adviser. Self-directed investors have fewer investable assets, overall,
than the group that uses an adviser: only 16% have $1 million or
more to invest, compared to 32.6% of the advised group. Many
of them are open to the idea of working with an adviser: when
asked whether they would consider working with one, 73.4%
responded with a positive, with 19.2% saying “definitely,” and with
54.2%—more than half—saying “possibly.” As a result, for the
purposes of this study, DIY investors are treated as prospects.
That makes the key question, why don’t these investors use
an adviser today? The answers are no surprise. Among the
millionaires, the most common response was that they were
planning on their own (57.7%)—which has the potential to do
real harm when it comes to estate planning. This is one area
where a good adviser can quickly demonstrate his or her value.
The next most frequent answer was “I have not found a financial
adviser/planner I believe I can trust” (16.7%). Among the
remaining investors, the common responses were, in order, “I do
my financial planning on my own” (31.6%), “I have not saved
enough” (23.3%), “I do not feel that I have enough money to invest”
(13.9%) and “I have not found a financial adviser/planner I believe
I can trust” (11%). All of these responses call to advisers to reach
out and explain their services: Perhaps if self-directed investors
were to understand advisers’ value, they would become clients.
24 The Future of Advice
Worth noting: Female investors answered differently from males.
When asked why they were not working with an adviser, 24.8%
responded “I have not saved enough” compared to 16.2% of males;
and 11.4% said “spouse/relative provides financial counsel” compared
to 1.2% of males. Women were also far less likely to respond “I do
my financial planning on my own”: only 23.3% chose this response,
compared to 45.8% of males. These responses show that women
would benefit from educational programs designed especially for them.
7.3%
6.9%
7.3%
5.9%
8.5%
15.3%
11.9%
11.9%
16.2%
45.8%
24.8%
23.3%
1.2%
11.4%
I do my financial planning myself
I haven’t saved enough
Women Men
Figure 13 Reasons investors do not use a financial adviser, by gender
0% 10% 20% 30% 40% 50%
I haven’t found a financial adviser/planner I think I can trust
I haven’t found a financial adviser/planner who can meet my needs
Financial advice services are too expensive
Spouse/relative provides financial counsel
I don’t feel I have enough money to invest
7.3%
6.9%
7.3%
5.9%
8.5%
15.3%
11.9%
11.9%
16.2%
45.8%
24.8%
23.3%
1.2%
11.4%
I do my financial planning myself
I haven’t saved enough
Women Men
Figure 13 Reasons investors do not use a financial adviser, by gender
0% 10% 20% 30% 40% 50%
I haven’t found a financial adviser/planner I think I can trust
I haven’t found a financial adviser/planner who can meet my needs
Financial advice services are too expensive
Spouse/relative provides financial counsel
I don’t feel I have enough money to invest
Figure 12 Reasons investors do not use a financial adviser, by investable assets
0% 10% 20% 30% 40% 50% 60% 70%
9.0%6.4%
3.8%7.8%
16.7%11.0%
2.6%13.9%
5.1%
57.7%
23.3%
31.6%
5.1%5.9%
I do my financial planning myself
I haven’t saved enough
I don’t feel I have enough money to invest
Financial advice services are too expensive
Spouse/relative provides financial counsel
Under $1M in investable assets $1M+ in investable assets
I haven’t found a financial adviser/planner who can meet my needs
I haven’t found a financial adviser/planner I think I can trust
Business models and services for the next generation 25
Active Savers
DIY investors are making use of several savings avenues, including
qualified plans at work and at home: 60.3% save through an
employer-sponsored plan, 44.6% have individual retirement accounts
and 13.1% have a retirement account for the self-employed. Another
34.9% own a bank deposit instrument such as a money-market
account or a certificate of deposit. A hearty number of investors also
held securities outside of their workplace plans, with 28% saying
they invest in mutual funds or ETFs through an online brokerage,
and 25.2% saying they invest in individual securities through an
online brokerage. College savings plans were held by 12.1% of
investors, and automated investment services were used by 6%. Only
12.7% of the respondents said that they lacked money to invest.
Figure 14 How DIY investors invest their money, by age
Under 35 35-44 45-54 55-64 65+
Through an online brokerage
Through college savings plans
Through a self-employed plan
0% 10% 20% 30% 40% 50% 60% 70% 80%
In bank deposit instruments (CDs, money market accounts)
Directly in mutual funds and ETFs through an
online brokerage
Directly in individual securities through an online brokerage
60.7%65.6%
62.2%
33.3%66.1%
32.1%50.0%
39.4%
47.6%54.8%
27.4%32.2%
38.6%
45.2%35.7%
25.0%41.1%
33.9%
57.1%44.3%
19.0%26.7%
23.6%
45.2%34.8%
15.5%31.1%
22.8%
40.5%24.3%
6.0%17.8%
18.9%
4.8%7.0%
2.4%10.0%
7.9%
4.8%4.3%
7.1%12.2%
16.5%
23.8%10.4%
Through an employer-sponsored
retirement plan
Through an individual retirement account
Through an automated investment service
Figure 14 How DIY investors invest their money, by age
Under 35 35-44 45-54 55-64 65+
Through an online brokerage
Through college savings plans
Through a self-employed plan
0% 10% 20% 30% 40% 50% 60% 70% 80%
In bank deposit instruments (CDs, money market accounts)
Directly in mutual funds and ETFs through an
online brokerage
Directly in individual securities through an online brokerage
60.7%65.6%
62.2%
33.3%66.1%
32.1%50.0%
39.4%
47.6%54.8%
27.4%32.2%
38.6%
45.2%35.7%
25.0%41.1%
33.9%
57.1%44.3%
19.0%26.7%
23.6%
45.2%34.8%
15.5%31.1%
22.8%
40.5%24.3%
6.0%17.8%
18.9%
4.8%7.0%
2.4%10.0%
7.9%
4.8%4.3%
7.1%12.2%
16.5%
23.8%10.4%
Through an employer-sponsored
retirement plan
Through an individual retirement account
Through an automated investment service
26 The Future of Advice
The distribution of savings and investment vehicles shifted by age in
predictable ways. The younger the investor, the more likely he or she
was to have savings in a workplace retirement plan and the more likely
to feel unable to invest. The older the client, the more likely to have
money stashed in a variety of accounts—IRA, online brokerage and
at a bank.
The most active college savers were, predictably, ages 35 to 54.
But even then, the numbers never broke 20%. College savings
plans are still an underused vehicle. Though they may not be hugely
profitable for advisers, they can be used to draw the interest of
investors who are ramping up earnings and savings. And for high
earners in many states, they offer distinct tax advantages. They
also could serve as an introduction to broader conversations about
long-term planning, as well as a bridge to the next generation.
Business models and services for the next generation 27
What DIY Investors Want Most
Unlike advisers’ clients, self-directed investors were not looking for
an adviser to take over securities selection: in fact, when asked to
select the five advisory services they’d value most, only 16.3% chose
investment management. Among this group, the most widely valued
service was retirement income planning (35.3%), followed by estate
planning (28.8%). Financial plan development and cash flow planning
tied for third place with 27.1%, and retirement saving came in fifth
with 25.8%. Women have an even stronger bias toward advice than
men, and demonstrated significantly more interest in life planning
or counseling.
To interest self-directed investors in using an adviser, the most
powerful differentiator is personal service. But that doesn’t mean
you can’t lead with an online suite. Compare the responses to the
questions: “Would you consider using an adviser in the future?”
to “Would you consider using an online portal for financial advice
or financial planning services?” Only 16.3% said they’d definitely
Figure 15
Retirement income planning
Estate planning
Financial plan development
Cash flow planning
Retirement saving
Bill payment
Brokerage
Insurance planning
Income tax planning
Investment management
Credit and debt counseling
Business planning
Education/college planning
Life planning or counseling
If you did seek out financial advice, which of the following services would provide the most value?
Investment consulting (strategy or manager selection)
0% 10% 20% 30% 40%
35.3%
28.8%
27.1%
27.1%
25.8%
19.6%
18.7%
18.1%
16.8%
16.3%
15.1%
14.8%
14.2%
13.3%
12.9%
Figure 15
Retirement income planning
Estate planning
Financial plan development
Cash flow planning
Retirement saving
Bill payment
Brokerage
Insurance planning
Income tax planning
Investment management
Credit and debt counseling
Business planning
Education/college planning
Life planning or counseling
If you did seek out financial advice, which of the following services would provide the most value?
Investment consulting (strategy or manager selection)
0% 10% 20% 30% 40%
35.3%
28.8%
27.1%
27.1%
25.8%
19.6%
18.7%
18.1%
16.8%
16.3%
15.1%
14.8%
14.2%
13.3%
12.9%
28 The Future of Advice
take advantage of online services, vs. 19.3% who said they’d
definitely consider using an adviser in the future. Adding up the
“definitely” and “probably” responses, 66.7% of respondents could
be considered prospects for online services, vs. 73.5% for personal
services. DIY investors with less than $250K to invest were the
most amenable to an online service model (76.2%), however, making
this a feasible option for introducing a low-minimum offering.
Key takeaway: The message here is clear: the DIY crowd values
personal advice and guidance more than investment selection.
They want help with budgeting, saving and planning. To appeal to
them, offer guidance for meeting these needs. If you want to start
with an online offering, these investors are interested, especially on
the low end.
0%
10%
20%
30%
40%
50%
60%
Figure 16
Yes, definitely Yes, possibly No Unsure
Large majority of DIY investors are open to working with a financial adviser
16.3%19.3%
25.2%
55.1% 54.2%
47.0%
10.2%
17.4%
10.2%
17.4%
7.6%
16.3%
Would you consider working with a financial adviser if he or she could deliver most of or all the services you need via online or digital options?
Would you consider using an online portal for financial advice or financial planning services?
Would you consider using an adviser in the future?
Business models and services for the next generation 29
CONCluSION AND ACTION ITEMS
The survey results pointed at some real business opportunities for
advisers. Number One would be to rethink business as usual. Here are
some steps that will be discussed in more depth in upcoming reports:
1) Expand your services—and create alliances with experts. Investors
in all age groups report that they would like a full-service relationship,
with access to financial planning, investments, and tax and estate
advice from a single source. One challenge for small practices
will be to gain access to the expertise their clients expect. Some
avenues for expanding your offering are consolidation, strategic
partnerships with like-minded experts across disciplines, or by
tapping experts provided by your custodian, broker-dealer or bank.
2) Give Clients Online Access from Anywhere, at Any Time. 65.3%
of those under 45 want their advisers to offer more services online
in the future, and their primary device for accessing information is
their smartphone. These same younger clients expect that, in the
future, they will communicate with their advisers by text message,
the same way they communicate with family and friends today.
All clients, however, want access to their account balances online—
plus the ability to look at aggregated assets, research investments
and contact their adviser, as well as, in some cases, transfer funds
and pay bills. This is true for retirees as well as the youngest
investors. Don’t forget: affluent retirees travel a lot, and they don’t
have to tolerate being out of touch just because they’re on a cruise.
To stay on top of your clients’ needs, imagine your services as they
might be offered by your favorite consumer website. How can you
provide the same level of service and responsiveness to your clients?
3) reach Out to Youth. For a practice to be sustainable, it needs
new clients—and eventually, younger clients. So why not reach out
to younger clients now, as they are building wealth, with a low-cost
online offering?
4) Get Social. To find new clients, go where they are—and that means
LinkedIn (81.3%), Facebook (37.4%) and Twitter (26.6%). Advisers
interested in cultivating an audience among women would be well
served to add Pinterest and Instagram to the mix—these more
visually oriented sites will also spur advisers to think creatively about
infographics, which often help communicate complex concepts in a
compelling manner.
About InvestmentNews research
The mission of InvestmentNews Research is to provide financial
advisers with the industry’s most informative practice management
studies and benchmarking reports. Our benchmarking studies
are a leading source of market intelligence for advisory
firms and industry partners, such as custodians, broker-
dealers, service providers and professional organizations.
In 2009, InvestmentNews acquired two bellwether benchmarking
studies from Moss Adams LLP – the Adviser Compensation
& Staffing Study and the Financial Performance Study of
Advisory Firms. We continue to improve and expand these two
critical industry studies, while we have also introduced new
studies on technology and succession planning, which support
the growth and development of financial advisory firms.
In tandem with our InvestmentNews Custom Media division
(INCM), InvestmentNews Research is now developing custom
studies, reports and white papers for some of the industry’s
most influential companies. INCM has focused on creating
insightful, unique content that empowers advisers and provides
firms that support advisers with assistance in understanding
– and engaging with – this important audience.
For more information on InvestmentNews Research or
InvestmentNews Custom Media, please contact Mark Bruno
Owned by Crain Communications Inc., InvestmentNews is the
premier provider of news, data, research and events to the financial
advisory industry. Through our weekly newspaper, website, data
centers, benchmarking reports and conferences, we provide
industry-leading tools and resources that allow financial advisers
to learn more about their businesses, clients and competition.
30 The Future of Advice
Acknowledgements
RESEARCH
About Cambridge Investment research
Cambridge Investment Research, Inc. (Cambridge), member
FINRA/SIPC, is an independent, privately owned broker-dealer
with over 2,500 independent registered representatives and
$61 billion assets under management. Cambridge was recognized
as one of the Best of Iowa Businesses and has been named
among the Top Workplaces in Iowa. Cambridge also provides
innovative fee programs and a full menu of commission offerings
to advisors across the nation. Recognized in the industry as
The Fee Experts®, Cambridge has been ranked a fee leader
among independent broker-dealers for 13 consecutive years.
Business models and services for the next generation 31