Fidelity® Survey Finds Only 57 Percent of Financial Advisors Proved Their Worth to Their Clients in Navigating Recent Market Conditions

New Insights on Advice Report Uncovers Traits of Valued Advisors, Offering Insights that may Help Financial Advisors Meet the Needs of Key Client Segments, Including Gen X/Y Investors

BOSTON – Fidelity Investments® today unveiled the third report in its Insights on Advice series, which revealed that only 57 percent of investors surveyed said their financial advisors proved their worth navigating recent market conditions. The report, “Proving Your Worth: Uncovering the Traits of the Valued Advisor,” is based on two recent Fidelity studies1. It explores how investors viewed their financial advisors’ performance and opportunities for advisors to enhance their value proposition to better meet the needs of key client segments.

According to the report, financial advisors who proved their worth – or “Valued Advisors2”—benefited from clients who were more engaged, trusting and loyal, with 66 percent saying they would likely stay with their advisors if they switched firms (compared to 37 percent for investors without a Valued Advisor). Valued Advisors also benefited from three times the number of referrals, significantly higher share of wallet3 (71 percent vs. 49 percent) and more clients looking to consolidate assets with them (39 percent vs. 24 percent).

The report found that investors who valued their advisors cited three key reasons: Valued Advisors were focused on long-term investment strategies, provided comprehensive guidance and focused more on holistic planning services, and leveraged technology to foster a more collaborative relationship.

“The definition of the Valued Advisor is clearly evolving. It’s no longer just about money management, but about providing peace of mind, getting to know the client personally and using technology to enhance the relationship, not replace it,” said Ross Ozer, senior vice president, Fidelity Institutional Wealth Services. “Financial advisors may want to consider putting energy into these areas to help ensure that they are among the 57 percent proving their worth to investors.”

Why Advisors are Valued
The report uncovered three key traits of the Valued Advisor:

1. Valued Advisors were focused on long-term planning. According to the report, when working with Valued Advisors, investors were more focused on long-term investment returns (84 percent vs. 74 percent for other investors) than short-term fluctuations in the market. In addition, when investors were asked to indicate the most important benefits of working with an advisor, those with Valued Advisors said they “help me reach my financial goals” (72 percent), “help me achieve financial independence” (65 percent) and “provide peace of mind” (61 percent) as their top three benefits.

2. Valued Advisors provided comprehensive guidance. More investors with Valued Advisors (29 percent) were interested in receiving holistic financial guidance than their counterparts without Valued Advisors (18 percent). In addition, 63 percent of investors with Valued Advisors wanted their advisor to know everything about their personal and financial lives so they could help them plan accordingly.

3. Valued Advisors used technology to their advantage to enhance client relationships and promote collaboration. Forty-two percent of investors with Valued Advisors felt technology had enhanced the relationship versus 20 percent of those without Valued Advisors. Moreover, 45 percent of investors with Valued Advisors agreed that they collaborate more effectively with their advisor through the use of technology.

“Understanding the attitudes and services desired by investors who valued their advisors may point to opportunities for future growth,” said Alexandra Taussig, senior vice president, National Financial®, a Fidelity Investments company and the nation’s second largest clearing provider. “By hearing from investors what it means to be valued, financial advisors may be able to examine, and potentially improve, their service offerings to ensure they are meeting client needs and positioning themselves for success.”

Gen X/Y Investors Seeking Simplicity and Technology
By uncovering the characteristics of a Valued Advisor, opportunities for possible improvement emerged for financial advisors to enhance their value and better meet the goals of important client segments, including Gen X/Y investors. The report found that relationships between Gen X/Y investors and Valued Advisors were stronger than for other investors, even those with Valued Advisors. Gen X/Y investor referrals were close to 80 percent higher, and 70 percent of Gen X/Y investors with Valued Advisors depended more on their financial advisor in the past year (compared to 49 percent of all investors).

As a result, this group had a slightly different perspective when it came to proving worth. Sixty-five percent of Gen X/Y investors felt it takes a lot to manage all the different aspects of their financial lives, and 70 percent were looking to simplify their finances. While they were inclined to try new types of investments and take on risk, they also wanted more communication from their advisors, with 59 percent of Gen X/Y investors expecting their advisors to contact them if the stock market changed a lot in one day.

Technology played a more integral role for this group, with more Gen X/Y investors saying that technology enhanced their relationship with their advisors (55 percent vs. 28 percent for older investors) and that it enabled more effective collaboration (62 percent vs. 33 percent). In addition when compared to their older counterparts, Gen X/Y investors were more likely to use social media (by 23 percentage points), phones (by 23 percentage points) and tablets (by 21 percentage points) as tools for their financial activities.

Key considerations for financial advisors that may help enhance their value with Gen X/Y investors include:

  • Educate and minimize complexity. To help Gen X/Y feel more receptive and less overwhelmed, advisors may want to consider minimizing complexity in the investment process and focusing on educating this group on newer or riskier investments.
     
  • Leverage technology to enhance engagement. Financial advisors might want to consider increasing communication with this group, especially through the use of technology, including smartphones, tablets, text, emails, webinars and webcams. This increased interaction through technology may help enhance engagement without diminishing advisor value.

Additional Insights on Advice
“Proving Your Worth: Uncovering the Traits of the Valued Advisor” is the third report in Fidelity’s annual “Insights on Advice” series. As part of this year’s series, Fidelity has launched an interactive website with actionable insights and resources from the Insights on Advice studies that can help financial advisors better serve their clients.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.8 trillion, including managed assets of $1.6 trillion, as of October 31, 2012. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

1) The findings are based on two recent Fidelity studies: Fidelity® Millionaire Outlook (July 2012), which analyzed the attitudes and behaviors of millionaire and mass-affluent investors on a variety of investing topics; and Fidelity® Broker and Advisor Sentiment Index (October 2012), which looked at advisor satisfaction with their profession and their firms’ offerings as well as their own approach to various financial advisory activities.
2) Valued Advisors proved their worth to investors while navigating recent market conditions, which resulted in their clients seeing clear value in their service offering.
3) Share of wallet is the amount of investible assets an advisor manages for a client.
4) The findings are based on two recent Fidelity studies: Fidelity® Millionaire Outlook (July 2012), which analyzed the attitudes and behaviors of millionaire and mass-affluent investors on a variety of investing topics; and Fidelity® Broker and Advisor Sentiment Index (October 2012), which looked at advisor satisfaction with their profession and their firms’ offerings as well as their own approach to various financial advisory activities.

Fidelity Investments does not provide advice of any kind. You should conduct your own analysis, review, and due diligence based on your specific situation. You are responsible for evaluating your own specific needs and making appropriate decisions. Those decisions may be based on these and other factors you deem relevant. The information provided herein is not meant to be exhaustive of all possible options you may consider.

The experience of the brokers/advisors who responded to the Fidelity Broker and Advisor Sentiment Index survey may not be representative of the experiences of all brokers/advisors and is not indicative of future success. The experience of the investors who responded to the Fidelity Millionaire Outlook survey may not be representative of the experiences of all investors and is not indicative of future success.

The content provided herein is general in nature and is for informational purposes only. This information is not individualized and is not intended to serve as the primary or sole basis for your decisions as there may be other factors you should consider.

The Fidelity Millionaire Outlook is a primary research study among U.S. mass affluent and millionaire investors conducted via online survey during the period of March 15-29, 2012. The mass affluent group had investable assets of at least $250,000 or $100,000 if they had an annual household income of $150,000 or more, while the millionaire group had investable assets of at least $1 million; both groups’ investable assets were excluding workplace retirement accounts and any real estate holdings. The results reflect responses from 1,520 financial decision makers with 1,020 of those being millionaire investors. The data reflects a margin of error of +/-3 percent. Using a scale where +100 represents the most favorable outlook, zero is neutral and -100 is the most negative outlook, the survey measures millionaires’ confidence levels across five key areas -- the stock market, consumer spending, the economy, business spending and the value of real estate. Combined, the five variables make up a cumulative current and future confidence level, or “outlook.” The experience of the mass affluent and millionaire investors who responded to the survey may not be representative of the experiences of all investors and is not indicative of future success. Fidelity partnered with Bellomy Research, an independent third-party research firm, to conduct the study.

The 2012 Fidelity® Broker and Advisor Sentiment IndexSM was fielded through an online survey during the period of March 15–29, 2012. Participants included 1,207 advisors from across multiple firm types who work primarily with individual investors and manage a minimum of $10 million in assets under management. Firm types included a mix of large and small independent broker-dealers (IBDs), regional broker-dealers, banks, wirehouses, insurance companies, and registered investment advisor (RIA) firms, with findings weighted to reflect industry composition. Bellomy Research, an independent third-party research firm, conducted the study. The data reflect a margin of error of +/–3%.

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