More DIY investors want an advisor in their corner

Self-directed investors, who traditionally manage their investments independently, are increasingly recognizing the value of human advice, according to new research from Cerulli.

As this cohort of investors softens on their preference for DIY investing, the Cerulli report indicates that wealth management providers have an opportunity to convert these investors into clients who actively seek advisory relationships.

Cerulli’s U.S. Retail Investor Products and Platforms 2024 report highlighted that more than one in five users of self-directed investment accounts (22 percent) consider the ability to consult a human specialist linked with their account as crucial, with an additional 33 percent finding it somewhat important.

It also found 42 percent of self-directed investors are at least somewhat likely to pay for the ability to consult a specialist. Younger investors, often less experienced with self-directed accounts, are particularly inclined to pay for advice, with one in five stating they are extremely likely to do so.

Despite the appetite for human advice, only 39 percent of respondents have ever used an advisor. Adoption is particularly low among those with less than $1 million in investable assets and individuals under 30.

That finding squares with other recent research from Citizens on the great wealth transfer, which found a prevailing belief among investors that they have to inherit at least $1 million before professional advice on managing their inheritance becomes worth it.

To bridge this gap, Cerulli says providers who want to leverage human interactions in delivering financial advice must ensure easy access to specialists for clients, facilitating the development of advisory relationships.

“If a full-service provider’s objective of offering self-directed brokerage accounts is to eventually transition those customers into advice relationships, they must make those interpersonal services visible to those clients,” said John McKenna, analyst at Cerulli, who recommended stoking “early awareness” at key milestones “through targeted e-mail and notification campaigns.”

As the number of self-directed investors seeking advice, especially younger consumers in the direct and banking channels, reaches a tipping point, McKenna said firms must know how to capitalize on opportunities to reach out to these soft targets.

“By identifying the moments of greatest need, transitioning clients to more advised relationships can lead to increased walletshare and more harmonious one-stop shopping for all financial needs, creating loyal customers for decades to come,” he said.