Investors Nearing Retirement Seek Strong Support and Brand Familiarity, Cerulli Reports

Investors who are within five years of retirement sought out advisers with robust support offerings and favored brands familiar to them, according to the latest research from Cerulli Associates focused on U.S. retail investors.

Generally, 27% of investors are adviser reliant. However, five years before retirement 46% of investors become adviser-reliant, which jumps even further when they are one year from retirement to 57%.

And as their reliance on advisers increases, their preference for familiar brands grows as well. At the point of retirement, 45% of investors want an adviser connected with a national firm, compared to the baseline of 39%. Meanwhile just 20% have no preference about adviser type at retirement, a drop from the original 30%.

“This underscores the importance investors place on the reliability of their advisory relationships as they enter this stage of life,” Cerulli said in a statement with the research.  

The research underscores the importance of name recognition and scale when near-retirees turn to financial advisement and personalization. Insurance, retirement, and wealth management adviser aggregation has been strong this year despite a high interest rate environment, particularly when it comes to retirement-related deals, according to recent research from consultancy MarshBerry. Meanwhile, recordkeepers with workplace name recognition continue to lean into wealth management connection to participants, with Empower launching a marketing campaign for its personal wealth division, and Principal Financial Group rebranding its asset management arm.

Cerrulli’s research found that 39% of investors prefer dedicated home-office teams for portfolio management, followed by 29% of respondents who opted for individual advisers, Cerulli found.

The firm said investor preferences align with its best-practice recommendation of having client-facing advisers identifying key factors affecting portfolios, while implementation is managed by separate dedicated resources. 

To gain share in the retiree market, firms and practitioners should consistently emphasize their commitment to clients’ best interests and highlight their support resources, Cerulli recommended.

“While most investors have little familiarity with the term ‘fiduciary,’ this type of relationship is the core of client preference,” Scott Smith, director of advice relationships, said in a statement. “Communicating this commitment believably in terms that clients understand is vital to ongoing client acquisition, especially as prospects approach their anticipated retirement date.”

The heightened need for engagement by participants nearing retirement has also been a focus for defined contribution investment innovations. Empower was a pioneer in 2017, to introduce a dynamic qualified default investment alternative that automatically defaults a participant into a managed account option when near retirement. More recently, John Hancock Retirement and Principal Financial Group announced similar offerings in 2023, and Voya Financial has one under consideration.

According to separate Cerullia research, hybrid QDIAs have had some uptake in recent years. In a survey of target-date product managers, 11% of assets were held in dynamic QDIAs as of year-end 2021, up from 2% in 2019.