Are advisors going overboard on their service offerings? No way, Cerulli says

The gap between what financial advisors offer and what their wealthy clients actually use tells a story about the advisory business that goes well beyond marketing miscues.

Advisors across all channels offer an average of 6.1 financial planning services, according to new research from Cerulli Associates. But when researchers asked affluent clients what they actually use, the number dropped to just under three – a 50% disconnect.

It's not across the board. Ninety-four percent of advisors offer retirement income planning, which tracks closely with how clients actually use their services. Retirement savings comes in second for advisors at 89% and also ranks high with clients.

From there, the numbers get interesting. Two-thirds of advisors say they offer insurance services – life, health, disability – but only 17% of retail investors actually rely on their primary advisor for insurance. Same goes for tax planning: 47% of advisors provide it, but just 14% of affluent clients use that service through their main financial provider.

The pattern continues across estate planning (56% of advisors offer it, 22% of clients use it), charitable planning (49% versus 13%), and elder care planning (32% versus 12%). 

Slicing the data by channel, Cerulli found nonbank broker-dealer networks and hybrid RIAs are substantially more likely to offer estate and charitable planning services compared to independent RIAs and retail bank broker-dealers. Nonbank brokers offer estate planning at 57%; independent RIAs at 49%; and retail bank broker-dealers at 46%. That positioning makes sense, as firms catering to more well-heeled clients naturally develop services that appeal to that demographic. But even at firms aggressively promoting these services, actual client uptake remains modest.

Part of that might be due to a difference in how they see tax optimization. Tax-loss harvesting and portfolio tax efficiency can create real value, especially for affluent investors in volatile markets. But if clients view these as techniques embedded in portfolio management rather than standalone services, they may not consciously register them as "using tax planning."

The research also points to a communication problem dressed up as a service problem. John McKenna, a research analyst at Cerulli, noted that advisors may already be "offer[ing] these services within client portfolios as a core offering, but that they are not effectively being communicated to the client."

To break through that barrier, Cerulli recommends that advisors proactively speak with clients and understand their goals. With in-depth discovery meetings and a discussion of where and how they manage assets beyond investments, advisors can make the case for specific services, though they should "[remain] sensitive to client preferences" and their readiness to share certain information.

"Satisfied clients are the most willing to say the value of the advice they receive from their advisor is worth the expense, but competitive positioning relies on knowing that their advisor is doing more than just focusing on returns and collecting fees," McKenna said.