Fewer investors across all age groups are using traditional advisors as their primary provider of financial guidance, according to research group Cerulli Associates. 

The decline is most pronounced among Americans younger than 50. In 2005, 22% of households headed by individuals in their 20s used advisors as their primary advice provider.  By 2011, only 7% did.  The use of advisors also fell among investors in their 30s and 40s, falling from 20% and 27%, respectively, to 9% and 16%.  

Investors in older age groups also reported using traditional advisors less, particularly seniors over the age of 70. In 2005, 53% of the over-70 set relied primarily on their advisors for financial advice. By 2011, the percentage fell to 40%. 

Advisors are likely losing the business to direct providers that provide the types of relationships that younger investors seek.  According to Cerulli, younger investors are not as interested in having a personal relationship with their advisors as previous generations.  In fact, they are likely to perceive quarterly or even annual visits to an advisor’s office “as an onus rather than a bonus,” Cerulli writes in its latest issue of The Cerulli Edge – Advisor Edition. 

Cerulli also attributes the decline in the use of advisors to the financial industry’s “infatuation” with serving wealthier clients, especially Baby Boomers. It says that as traditional advisors focused on higher wealth tiers, younger, less wealthy investors may have been underserved.  

The underserved market created an opportunity for large 401(k) plan providers eager to expand their relationships with younger retirement plan participants to step in. And that now puts advisors in a precarious situation.  “If investors are largely satisfied with the service of their direct advice provider, few will see a benefit in moving to a traditional advisory relationship,” according to the report.

READ MORE:  Competitive Threat Grows—But Banks Hold Some Advantages

Register or login for access to this item and much more

All Bank Investment Consultant content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access