Advisors Are Adding More Services. Clients Aren’t Using Them

Wealth managers are stuffing their menus with more offerings than a Cheesecake Factory, but clients aren’t biting.

While advisory firms continue working to become one-stop shops, clients know what they like and are sticking to it, according to a recent Cerulli report. Advisors reported offering six out of the 11 major planning services — such as estate planning, tax preparation, insurance, elder care planning and more — but clients use fewer than three of these services, on average. The gap stems from the fact that advisors might not know to broach a topic like elder care with a financial planner, experts said. Making sure clients know about all the services available to them can also help advisors provide more value and ensure they have better investing outcomes.

“Clients don’t know what they’re not getting, and advisors are sticking with what they’re most comfortable with,” said Scott Smith, senior director of advice relationships at Cerulli. “They aren’t being proactively offered that by advisors: ‘I’m doing the thing I’m comfortable with. My clients are happy. Why would I risk it?’”

What A Client Wants

Another reason for the growing gap is firms’ fear of being replaceable. More and more advisory teams want to assign themselves the catchall label of comprehensive wealth management, Smith said, especially since the more services a client trusts an advisory team or firm to handle, the more likely they are to stay. This becomes especially important for long-term viability, he added, as younger clients are more likely to stick with a firm for decades, rather than switch later in life. “[Advisors are] looking at their tomorrow, or their next year, and their 100 clients aren’t going to get up and move because they aren’t giving tax optimization,” he said. “But for the firm with a longer horizon, these things will have an impact more so than [for] an individual advisor.”

According to the Cerulli report:

• 48% of clients received comprehensive financial planning last year, a figure expected to rise to 55% by next year.
• Retirement advice ranked the highest among services used by clients.

Partner Up. Smith estimates that about a quarter of current clients classify as “prospects,” meaning they might work with a bank or 401(k) provider but aren’t getting specialized advice. Prospects settling on a long-term financial planner are growing progressively younger, which has led to a proliferation of institutions buying up smaller entities, such as stock-plan administration platforms, to cater to future high earners.

“Firms are gobbling up those early-career wealth accumulation companies. If you’re a 28-year-old and just got stock credit … That’s going to be a rich person someday,” Smith said. “Bringing those people on as clients is a real challenge that, if you haven’t done it by age 50 …  they’ve probably found a dance partner already.”