The Future of Advice

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

[email protected]

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


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?


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,


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%


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%


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.


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


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


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.


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%


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


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


Personalfinancial adviser

Personalfinance websites


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%


Over $1M $250K - $999K Under $250K

0%

10%

20%

30%

40%

50%

60%

70%

Figure 8C

Financialnewspapers ornews websites

Financialinstitutions


Personalfinancialadviser

Personalfinance

websites


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%


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%


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.


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.


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%


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%



Send messagesto my adviser



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%


Send messages to my adviser




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%


Send messages to my adviser




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%


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.


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%



Women Men

Figure 13 Reasons investors do not use a financial adviser, by gender

0% 10% 20% 30% 40% 50%






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%






Under $1M in investable assets $1M+ in investable assets




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


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.


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


Estate planning


Cash flow planning

Retirement saving

Bill payment

Brokerage

Insurance planning

Income tax planning


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


Estate planning


Cash flow planning

Retirement saving

Bill payment

Brokerage

Insurance planning

Income tax planning


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%


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?


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.

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Acknowledgements

RESEARCH

About Cambridge Investment research

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The Future of Advice

Economy & Finance

Transcript of The Future of Advice