Data & Research April 14, 2011

Low Fees Not a Priority When Shopping for Adviser

Being knowledgeable and trustworthy are the most important factors people consider when searching for a financial adviser, the First Command Financial Behaviors Index found.   
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In a recent survey of middle-class Americans who work with a financial planner, three quarters of respondents picked “knowledgeable” and “trustworthy” as the most important attributes they seek in a planner. “Honest” came in third at 70%.

The First Command Financial Behaviors Index is conducted monthly to assess financial behaviors and attitudes among Americans. This month’s survey found that the top ten attributes consumers look for in a financial adviser are:

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  • Knowledgeable (75%)
  • Trustworthy (74%)
  • Honest (70%)
  • Many years of experience (59%)
  • Willing to listen (52%)
  • Positive word of mouth or referral (51%)
  • Confident (48%)
  • Personal Relationship (46%)
  • Understanding (44%)
  • Patient (34%)

Notably, the cost of advisory services did not make the top ten. Just three out of ten respondents picked “low price for services” as the most important attribute to look for in an adviser.

“Financial planning is not a commodity that consumers shop for based on price,” said Scott Spiker, CEO of First Command Financial Services. “Rather, it is a profession built on personal relationships with people you trust. Consumers are willing to pay for planning services when they feel the planner has the technical know-how and the moral fiber to help them pursue their long-term financial goals and lifetime dreams.”

Products April 14, 2011

Taking on the Role of Lead Adviser

State Street Global Advisors (SSgA) and the Wharton School of Business have published a study that found 17% of investors use two or more financial advisers–and most don’t “invest and tell.”
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SSgA teamed up with Knowledge@Wharton, an online resource center from the Wharton School at the University of Pennsylvania, to publish the report, “Taking on the Role of Lead Advisor: A Model for Driving Assets, Growth and Retention.”  The report explores the relationship between investors and financial advisers following the recession, the unintended consequences of using multiple advisers, and opportunities for investment professionals who are willing to take on the “lead adviser” role.

SSgA and Wharton surveyed 2,196 financial advisers and 776 investors for the report. They found that 49% of investors manage their own investment portfolios, 34% work with one adviser, and 17% work with two or more advisers. Among those who do not use a financial adviser, more than 50% do not believe the value that advisers provide is worth the cost. The most cited reason (44%) for using two or more advisers is to diversify risk.

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Even though the intention may be good (diversifying risk), investors may be taking on unknown risk, the research found. Of investors who work with at least two advisers, 65% consider one adviser to be their primary adviser; however, more than half (55%) of these respondents report their primary adviser is not aware that other advisers are also managing their assets. As a result of this disconnect, investors could be taking on too much or too little risk.

The report goes on to suggest that the lack of a “single view” on an investor’s complete financial picture could be used as a marketing opportunity for advisers. “Nearly every investor could benefit from the services of a competent lead adviser who integrates financial information across investment advisers, CPAs, estate planning attorneys and business advisers,” the report says.

Investment professionals can access “Taking on the Role of the Lead Advisor” by registering as a financial professional at SPDR University (www.spdru.com), an online educational center from SSgA.

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