As investors finally close out a year that seems a decade long, at least one bright spot got a little brighter. Industry surveys from Cerulli, iCapitalNetwork, Broadridge and Nationwide show that where clients are concerned, investment professionals scored some high marks in 2020.
While financial advisors reached high levels of achievement in selected areas, they performed “above average” elsewhere – and had one significant “area for improvement,” too. For this year-end Advisor Report Card, we examine five critical drivers:
- Overall Client Satisfaction
- Investment Diversification
- Client Communications
- Attracting First-Time Investors
- Extending Family Discussions
Here’s what we found.
Overall Client Satisfaction: Excellent
An overwhelming 80 percent of investors said they’re satisfied with their current advisor, according to a recent survey from research firm Cerulli Associates. In particular, investors cited high satisfaction with “the transparency, honesty and dependability of advisors,” according to the report.
“By keeping clients abreast of market developments, while also lending a crucial empathetic ear, advisors reinforce their importance to clients and the value inherent in personalized advice relationships.” Moreover, 82% of investors working with an advisor believe the services they get from an advisor are worth the price.
COVID-19 has also extended the client service reach of financial professionals beyond traditional financial concerns. According to a recent study conducted by Ulicny Financial Communications and 8 Acre Perspective, 60 percent of advisors said they are spending “more time with clients on non-investment-related financial issues,” while 84 percent said developing their clients’ financial literacy has become more important and 51 percent said they have been fielding more questions “about healthcare and estate planning.”
Cerulli Associates
Investment Diversification: Above Average
Following the financial crisis of 2008, investors enjoyed a decade-plus bull market that saw equities return more than 300%. “Today, however, pandemic-fueled volatility and a very uncertain market outlook have many advisors and clients seeking a steadier ride as well as diversified sources of return,” according to a report from iCapitalNetwork.
“Adding a 20% private equity allocation to a traditional 60%/40% stock/bond portfolio may enhance return potential while mitigating risk,” the report continued, noting that 69 percent of advisors “see opportunity in the current environment and are reshuffling portfolios with a goal of improving client outcomes.”
Most investors appear to be under-diversified and overdue for a portfolio rebalancing as well, according to the consumer version of our study with 8 Acre Perspective. “Seventy-five percent of investors reported their financial situation is as good as or better than before COVID-19,” the report stated. Yet, “more than seven in 10 have not made changes to their portfolios.”
Client Communications: Excellent
A whopping 79 percent of investors reported more frequent communications with their advisor since March when stay-at-home mandates were first issued, according to a Broadridge survey of 1,000 North American investors.
When asked what communications they most needed from their advisors, respondents agreed that after a comprehensive view of their accounts, they wanted tips on saving money, new investment ideas and a personalized analysis of their investing habits.
And investors aren’t looking back: “We are seeing an accelerated adoption of digitalization and personalization from investors, financial advisors and wealth firms as a result of the pandemic,” the report continued. “As a result, investors don’t want a return to the past. They largely prefer this new normal.”
Broadridge
Attracting First-Time Investors: Above Average
COVID is motivating legions of investors to think twice before “doing-it-themselves.” As a Nationwide survey pointed out last summer, one in four Americans polled said they sought the help of an advisor for the first time ever. That includes 26 percent of investors with at least $100,000 in investable assets, as well as 24% of all respondents who participated in the survey.
“Even if they do all the right things to manage their finances and investments, the vast majority of Americans agree they can still be blindsided by outside events,” the report added.
Advisors topped the list of trusted sources for general financial and money management advice during the pandemic, followed by friends and family as well as online portfolio tools.
Nationwide
Extending Family Discussions: Needs to Improve
Every report card has room for growth, so why would an advisor report card be any different?
A startling 44 percent of investors when asked to complete the statement, “My financial advisor has communicated with my (children, grandchildren, heir or spouse)” answered, “None of the above,” in the Broadridge investor survey.
Advisors may be missing out on building key family relationships with the millennials in the house just as some $68 trillion is set to transfer to next-gen investors by 2030.
The report continues: “With clients spending more time at home due to the pandemic, advisors have a once-in-a-lifetime opportunity to develop a deeper relationship with their client’s entire family. It doesn’t have to be more complicated than a video conference. This is a natural moment to engage, educate and communicate with spouses, partners and children.”
From diversification and client service to communications and attracting first-time investors, financial advisors had a good year. Despite all the Zoom calls and social distancing, financial advisors generally met and exceeded client expectations throughout 2020’s historic challenges.
Today’s adaptive financial pros are finding that the environment still holds many opportunities to pursue the new clients they want while they expand the relationships they have.
A startling 44% of investors, when asked to complete the statement, “My financial advisor has communicated with my (children, grandchildren, heir or spouse)” answered, “None of the above,” in the Broadridge investor survey.
