Top 3 Qualities Clients Want in Their Advisor: Cerulli

What You Need to Know

Clients want their financial advisors to be transparent in all interactions.
They want them to take the time to understand their needs, goals and risk tolerance.
They want advisors to monitor their portfolios and let them know about potential problems and opportunities.

What do potential clients value most when looking to hire a financial advisor?

Cerulli Associates, in conjunction with Phoenix Marketing International, surveyed more than 11,000 households with investable assets ranging from $100,000 to more than $5 million throughout 2020, and found, for clients at most asset levels, that more than half the respondents rated transparency in interactions and time to understand their needs, goals and risk tolerance the most important factors when choosing an advisor.

The third most important factor they identified: monitoring portfolios and letting clients know about potential problems and opportunities. That was important to 49% of respondents overall, but when asked to rate who had the highest level of investment expertise to run portfolios, just 29% of respondents identified their financial advisor. Thirty-eight percent named a dedicated investment team at their advisory firm.

Few respondents — 11% or less — considered more personal attributes such as an advisor having the same gender, background or experiences as important when choosing an advisor. In addition, few respondents (20%) considered cutting-edge technology in an advisor’s practice an important consideration.

“Clients have come to realize that their advisors cannot be experts in every aspect of managing their financial lives and that a team approach actually benefits them, while at the same time highly appreciating the personalization intrinsic to an advisor relationship,” according to the Cerulli report.

Tech Platforms and Direct Indexing

Technology platforms that help advisors keep an eye on problems and opportunities in client portfolios and track progress toward goals, as well as platforms that let advisors collaborate with clients in crafting truly personalized portfolios, can help enhance client-advisor relationships, according to Cerulli.

Direct indexing, which involves buying individual stocks that comprise an index rather than an index ETF or mutual fund, can help accomplish that personalization via customized portfolios, according to Cerulli.

The firm expects more direct indexing options will be available to a wider range of advisor clients, including less wealthy ones, due to “the growing adoption of fractional share trading, the elimination of commissions, the greater acceptance of algorithmic portfolio construction and the widespread investor demand for beta.”

Including Investments based on environmental, social and governance (ESG) factors, which appeal to young investors, is another way advisors can offer the personalization that clients value, especially “advisors who are concerned about retaining client assets as they pass to younger generations.”