Market Volatility Causing Clients to Seek Additional Support

Cerulli’s latest research shows that advisers tend to gain more clients during times of market volatility. Some of the largest increases in advisory relationships can be seen with high-net-worth households, it says. In 2011, 58% of investors with greater than $5 million in investable assets employed multiple advisers, versus just 27% when aggregating all wealth levels for a combined view.

Cerulli has been studying this trend for several years, and notes that the average number of advisers used by households has increased across all wealth tiers and investor types. It says this is due to non-advice users seeking advice for the first time, as well as advice seekers adding secondary and tertiary advice relationships.

Amidst the market downturn, loss of trust has driven clients to take control of their finances, according to Cerulli, as well as seek additional input.  Therefore, advisers need to carefully assess the strength of their client relationships and their influence.

“Interestingly, advisers are well aware of their clients’ outside relationships and accurately estimate the percent that have multiple relationships. Our research shows that advisers estimate 30% of their clients have multiple advisers, which is slightly higher than the 27% of investors that report as such. So, advisers have an accurate view of what their clients are doing,” comments Katharine Wolf, senior analyst and head of Cerulli’s investor practice.

“We believe investors will eventually reconsolidate their assets as they tire of overseeing multiple relationships. However, given the most recent volatility, more clients are likely to see additional advice as there is just so much uncertainty right now. However, advisers should be thinking about the long term and position themselves to benefit from the eventual reconsolidation, since secondary relationships will lose assets to favored advisers,” she added.