Financial Advisors’ Delicate Dance to Court Retail Investors

Even self-directed investors can use a little help. 

Americans are getting increasingly comfortable handling their own finances and that’s led to a rise in self-directed investors. This year, 31% of households said they feel at least somewhat experienced with investing, up from just 25% in 2010, according to a survey from market research firm Hearts & Wallets. However, the study also found that do-it-yourself investors are getting occasional help from financial advisors, with some 70% of experienced investors saying they paid for professional advice. 

It’s creating a delicate balance for advisory firms that are now figuring out how to provide full-service advice with hands-on options. “We can’t be cobblers, making bespoke shoes for everybody,” said Laura Varas, Hearts & Wallets CEO. “You’ve got to have some service models where you can say: This is the price for this amount of advice.”

Best of Both Worlds

Advisors are now offering different pricing tiers and service levels to help attract more diverse clientele. Varas likened it to shopping for a new car: Not everyone will want, need, or even be able to afford a fully-loaded Lamborghini. For retail investors, that means they may just need quarterly advice with retirement planning at an hourly rate from an advisor. 

It’s leading to new blended financial advice offerings with some of the largest wealth managers now offering products that were once only available through advisors.

• JPMorgan Chase has been building out its self-directed brokerage platform, adding features including fractional shares trading, market alerts, and a high-yield savings. Those products were previously not available to self-directed investors. 
• Next year, the company plans to add a new fixed-income investment option to its mobile app. 
• After an acquisition of TradePMR, Robinhood is hoping to connect its 24 million retail investors with financial advisors for the first time.

I Tried to Help. While some firms may hope to convert casual customers into full-service clients, Varas said that it could become an uphill climb. 

“They’re not going to go for it,” she said, adding that self-directed platforms are also increasing their offerings and lowering fees. “There are some really good experiences in self-directed and mid-level service that are much less expensive.”