Existing Clients Want More Advice
The good news for reps is that the world doesn’t hate you. The
bad news is that acquiring clients--particularly affluent ones--is
getting a lot more tough.
A recent Smith Barney survey of nearly 1,200 affluent investors shows
only 4 percent are chagrined enough after this three-year bear market
that they never want to invest in stocks again. More hopefully, a
majority of the wealthy investors say they are increasingly likely in
the next couple of years to move money from a bank to a brokerage
firm.
But here’s the bugaboo: Those who don’t have a financial
advisor don’t necessarily want one. Meanwhile, those who already
have advisors are clamoring for more advice. The survey--whose
respondents had an average age of 51, each with more than $100,000 in
investable assets--says 62 percent of those surveyed are willing to
consolidate assets with their current brokerage firm.
About 80 percent of the respondents have brokerage accounts. But only
50 percent have full-blown advisors, and of those, 71 percent say they
are unlikely to ever get an advisor. Further, nearly half of those
dissenters cite a lack of trust as a reason to stay away from
advisors.
Those who already have a broker seem to like them: 29 percent are
looking for more advice, compared with 19 percent of those who have no
broker.
"It is the investors who already have advisors who need even more
financial advice, implying advisors potentially have a bigger
opportunity to work with existing clients than with new clients," wrote
Smith Barney’s brokerage analyst Ruchi Madan.
The survey also suggests brokers have some work to do in managing
client expectations regarding the returns investments generate. The
survey respondents who employ brokers expect equity returns of 17.6
percent, compared with an expectation of 13.8 percent from those
without brokers. Both numbers are above the historical norm. (Expected
returns for bonds were 11 percent and 8 percent, respectively.)
Further, advisors might have some trouble converting clients to
fee-based arrangements. About one-third of customers currently have a
fee-based account, but fewer than 11 percent of the non-fee customers
say they are open to switching to a fee-based structure.
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