Financial advisors continue to face challenges in attracting new clients, even as satisfaction levels among existing clients remain high, according to a new report from Cerulli.
In its latest US advisor report, Cerulli highlighted the fact that 80 percent of clients are satisfied with their primary financial advisor, with that number rising to 88 percent among those with more than $5 million in investable assets.
Despite that, the report said more than half of advisors – 55 percent – cite client acquisition as a significant challenge. Nearly one-third, or 29 percent, also struggle to build multigenerational relationships, which are key to sustaining long-term business growth. Other hurdles include differentiating their services, retaining clients, and justifying fees.
A major obstacle in reaching new clients is the perception of cost and transparency among unadvised investors. Many prospective clients believe financial advice is too expensive, and even among those who work with advisors, fee structures are often misunderstood. One in four advised clients do not fully understand how their advisor is compensated, while one in five mistakenly believe they pay nothing at all.
In a survey report released last August, Dalbar said just over half of investors were confident in their understanding of investment fees, while 48 percent were either uncertain or totally in the dark about the fees they were paying.
“It’s an essential aspect of service for advisors. Consistency in communication, being upfront about any substantial changes to a client’s portfolio, and being explicit about costs are important discussion points,” said Noah Serianni, analyst at Cerulli. “For affluent investors, transparency is the most important factor when choosing an advisor, even more so than demographic or performance-based considerations.”
The report also highlights the growing willingness of affluent investors to pay for financial advice. In 2023, 59 percent of high-net-worth respondents indicated they would pay for advice, up from 45 percent in 2015. Advisors seeking to attract these clients may benefit from offering alternative fee structures, such as one-time financial planning sessions, which allow potential clients to assess services without long-term commitments.
In its latest 2024 industry snapshot, the Investment Adviser Association found 95.3 percent of all advisers adopted fees based on assets under management, while 45.2 percent reported using fixed fees. Other modes of compensation included:
“Increasing cost transparency will help advisors retain existing clients who value openness and honesty from their advisors while attracting new clients seeking someone they can trust,” Cerulli's Serianni said. “Integrity and openness go a long way in the minds of hesitant investors, and advisors who prioritize and effectively market these aspects of their service will find success attracting and retaining clients.”
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