Investors who have multiple advisors are likely more dissatisfied with the service they receive than those who have one advisor. But that makes them good targets for advisors who can offer one-stop service, according to a study by Principal Funds of the US.
“Financial professionals looking to secure a larger share of their existing clients’ assets through consolidation face a significant opportunity,” the study says.
It found that 5.7 million affluent US households use more than one financial professional to manage their assets. Of this number, about 40% plan to consolidate their business with a single financial advisor, thus providing an opportunity for competitive advisors who can make a pitch for consolidating services.
While investors often consolidate their assets later in life as they approach retirement, the study found that younger professionals, those aged 18-34, are the most open to consolidating their assets. About 40% of younger investors who use multiple financial intermediaries said they were likely to consolidate their assets under one financial professional or firm moving forward.
The report found that satisfaction was significantly lower among those served by with multiple financial professionals, with only one-third believing they get better service by using multiple advisors.
Multiple-advisor investors also have less confidence in their financial professionals’ abilities and are less inclined to recommend them to others, meaning less referral-based business for advisors, the study found.
“This general lack of satisfaction, low confidence in the financial professionals’ abilities, and limited likelihood they will recommend the financial professional are all good reasons for financial professionals to reach out to clients who use multiple financial professionals and open up a dialogue about consolidation,” the report said.
The advisors who are most likely to be able to entice a customer to consolidate services would be those who can offer a wide range of services, for instance investment planning, tax advice, education savings, and estate planning.
The study found that 61% of investors who had consolidated their business with a single firm or professional were satisfied with their choice: saying it was easier monitor performance and that fees tended to be lower.