CERULLI PRESS RELEASE

FOR IMMEDIATE RELEASE

Clients Seek Second Opinions and Additional Advisor Relationships
Current market volatility is likely to spur even more clients to seek additional support.

August 2011, BOSTON. Cerulli’s latest research shows that as clients’ trust in their advisors faltered during the market downturn, they sought second opinions and hired additional advisors to manage their assets. The current market volatility is likely to spur even more clients to seek additional support.

Some of the largest increases in advisory relationships can be seen with higher net worth households. In 2011, of investors with greater than $5 million in investable assets, 58% maintain multiple advisory relationships, 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 advisors used by households has increased across all wealth tiers and investor types. 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, as well as seek additional input. In effect, many investors are acting as their own financial quarterback, instead of trusting someone else with that role.

As clients take more control of their financial lives and use multiple relationships, advisors need to carefully assess the strength of their client relationships and their influence.

“Interestingly, advisors are well aware of their clients’ outside relationships and accurately estimate the percent that have multiple relationships. Our research shows that advisors estimate 30% of their clients have multiple advisors, which is slightly higher than the 27% of investors that report as such. So, advisors 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, advisors should be thinking about the long term and position themselves to benefit from the eventual reconsolidation, since secondary relationships will lose assets to favored advisors,” continues Wolf.

Cerulli analysts contend that best-practice advisors will regularly assess both their influence over client relationships and the health of those relationships. They will stay relevant through product and service offerings, remain front-of-mind through steady, continuous communication, and will solidify their position as the primary advisor through regularly demonstrating value to their clients….