Cerulli Associates, an international research and consulting firm, found that investor confidence in their advice providers’ fiduciary commitment has grown substantially; however, 40% of affluent investors remain skeptical.
This is according to recent research shared in the firm’s fourth quarter 2024 issue of The Cerulli Edge – U.S. Managed Accounts Edition.
Over the last 10 years, the share of affluent investors who believe that financial providers are dedicated to placing clients’ interests ahead of their own has grown significantly. In 2014, just 39% of respondents agreed with the statement, “I trust that financial services firms are looking out for my best interests.” As of 2Q 2024, this figure increased to 60%.
Cerulli’s research with MarketCast specifically targets two segments of investors – affluent investors with more than $250,000 in investable assets, and the near affluent who earn more than $125,000 annually and are younger than age 45. Responses in the survey – with the sample size being 10,000 – were weighted to reflect the distribution of households within the affluent investor segment, which, by definition, is wealthier and older than the aggregate U.S. population.
Respondents with $100,000 to $250,000 of investable assets are the least likely to believe in the benevolence of financial providers, according to the analysis and full report.
When considered through the lenses of age and wealth, levels of trust expressed by affluent respondents are consistent. Within all investable asset level cohorts of investors age 70 and younger, between 56% and 60% of respondents trust that providers are working on their behalf, and 65% of investors age 70 and older agree.
“This likely is an outcome of these older respondents benefitting from their long-term advisory relationships – they have enjoyed a prosperous retirement, which they attribute to the trustworthiness of their providers,” said Scott Smith, director of Cerulli Associates.
On a channel level, those with the highest incidence of dedicated adviser relationships, from private banks (75%) to full-service advisory firms (65%), boasted client trust figures far higher than channels in which dedicated advisory relationships are the exception.
“These results reinforce investors’ preference and increased satisfaction when they are able to develop and maintain ongoing relationships with advisers whom they believe understand their unique circumstances and preferences in pursuit of their goals, thereby earning heightened confidence in their loyalty,” said Smith.
On the flip side, according to the research, 24% of the skeptical investors say they are unsure if advisers are recommending the best products while only 11% of those who trust financial firms are concerned over product recommendations.
Although 40% of affluent respondents are skeptical about whether financial firms look out for their best interests, this skepticism might be remedied through carefully established adviser relationships. According to Cerulli’s research and insights, advisers can position themselves as trustworthy partners in financial success, even among wary investors. Advisers have control over how much contact they have with their clients, and how they deliver financial information at the outset can be a key bridge to skeptical clients.
“How advisers communicate with their clients will significantly influence whether clients trust them with their investments. Understanding the methods clients prefer – in-person or online – can serve as a conduit toward earning their trust. Once that base level of trust is established, advisers can discuss product recommendations that are in keeping with clients’ financial plans,” concluded Scott.
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development.
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