Commentary on WealthManagement.com article by Thomas Seubert
A recent report from research firm Cerulli Associates finds that more investors are willing to pay for professional financial advice despite the rise of robo-advisors, WealthManagement.com writes. But advisors could be misreading how investors want that advice delivered, according to the report.
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Investors Favor Fee-Based, Fiduciary Advice
While only 40% of investors said they’d pay for financial advice in 2014, that figure rose to 50% in the third quarter of last year, according to Cerulli.
But while robo-advisors aren’t running traditional advisors out of business, the proliferation of offerings in the space is indicative of a divide between investor demands and what traditional advisors currently provide, WealthManagement.com writes.
For starters, investors who rely on advisors overwhelmingly prefer fee-based advice: just 21% say they prefer a commission-based model, according to Cerulli’s report. Advisors resisting switching from commission- to fee-based advice could be annoying clients as a result, WealthManagement.com writes.
Meanwhile, while most advisor-client relationships aren’t subject to the fiduciary standard, 67% of investors think advisors should put clients’ interests first, according to Cerulli. But this disconnect will likely be narrowed by the Department of Labor’s fiduciary rule, according to WealthManagement.com.
Cerulli concludes that investors with complex financial needs still prefer human advisors to robos. But to stay in the game, traditional advisors will need to adapt to investors who want fee-based fiduciary relationships, according to the report, WealthManagement.com writes.