Advice Alpha

Re-defining value – and success – for an advice-centric era

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Advice Alpha

Re-defining value – and success – for an advice-centric era

By IN Research and Cetera Financial Group — March 13, 2018

Today's advice and financial planning business is prospering. It enjoys revenue of almost $60 billion annually and is growing at a rate of more than 8% a year.

Satisfaction is high among current clients for the services they receive — typically a variable mix of financial planning, investment advice and overall wealth management services that helps them meet financial goals and prepare for the future. And the voluntary transition of much of the business from commission-based models to those based largely on asset-management fees seems to confirm client satisfaction with how they pay for the services they receive.

But the business also faces challenges — particularly in the area of financial advice itself.

Few advisers would dispute that their industry has been – and will continue to be – disrupted.
Even fewer advisers, it would seem, are planning to do anything about it.

At the moment, many prospective clients do not understand the services that firms offer. Others do not perceive value in using an adviser. Existing clients, while satisfied with the array of services they receive, most often pay for advice through fees tied to just one service: investment management. And technology, which has disintermediated so many other businesses, is now doing the same to investing, putting pressure on fees for managing assets, powering new forms of competition and rapidly re-shaping the expectations of consumers.

This research study, drawing on findings from an InvestmentNews Research survey and insights from some of the industry's top advisers who participated in an InvestmentNews/ Cetera Think Tank roundtable discussion, aims to provide a view of the future shape of financial advice.

Based on our research, we believe that instead of conforming to today's advice-firm business models, clients and potential clients in the near future will demand that firms offer products, services, pricing and access that are just as customized to their particular needs and wants as the financial plans and advice that firms currently provide.

Infographic: What is the value of advice? Here's how much our 1,500 respondents – broken down by those who use advisers and affluent do-it-yourself investors – value investment management, relative to other services.
*All other services include financial planning, retirement planning, asset protection and tax planning/advice

Transitioning from a “one-model-serves-many” to a “one-model-per-client” business mentality will require truly transformative thinking. Nevertheless, moving to more dynamic offerings and pricing will be required in order to maintain the viability and vibrancy of the business. Perhaps above all, it will involve developing metrics for measuring and defining “advice alpha” — or the quantifiable value that an adviser delivers.

Download the report here

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