Your clients are getting smarter

Produced by Rogers Custom Insights and Research Group. n=192. Margin of error: 5.9%, 9 times out of 10

Advisors say more than four in 10 clients don’t understand the risks and rewards of investing in the capital markets. So finds the inaugural Advisor Group Investment Insights* survey, which asked Canadian advisors about their clients’ financial sophistication and risk perceptions.

Advisors say more of their clients are doing research, mostly online, before meetings. But is it effective? While responses indicate client knowledge has improved over the last five years, and that clients are asking tougher questions, advisors estimate 43% of their clients don’t understand the risk-reward trade-off inherent in the capital markets.

Read: Why you may need a robo-advisor

As such, advisors recognize that the current glut of financial information isn’t necessarily translating into better-informed clients.

Instead, the best advisors are expanding their product knowledge and improving credentials — and using this client behavioural change as a chance to demonstrate how they add value to the relationship.

More successful advisors don’t necessarily have SAVVY clients

What proportion of your client base…

CLIENT RESEARCH CAN SPUR MISUNDERSTANDINGS

n=146 (Advisors stating clients are doing more research)

What challenges do informed clients present to you?

Produced by Rogers Custom Insights and Research Group. n=192. Margin of error: 5.9%, 9 times out of 10

Advisors say more than four in 10 clients don’t understand the risks and rewards of investing in the capital markets. So finds the inaugural Advisor Group Investment Insights* survey, which asked Canadian advisors about their clients’ financial sophistication and risk perceptions.

Advisors say more of their clients are doing research, mostly online, before meetings. But is it effective? While responses indicate client knowledge has improved over the last five years, and that clients are asking tougher questions, advisors estimate 43% of their clients don’t understand the risk-reward trade-off inherent in the capital markets.

Read: Why you may need a robo-advisor

As such, advisors recognize that the current glut of financial information isn’t necessarily translating into better-informed clients.

Instead, the best advisors are expanding their product knowledge and improving credentials — and using this client behavioural change as a chance to demonstrate how they add value to the relationship.

More successful advisors don’t necessarily have SAVVY clients

What proportion of your client base…

CLIENT RESEARCH CAN SPUR MISUNDERSTANDINGS

n=146 (Advisors stating clients are doing more research)

What challenges do informed clients present to you?

8% of advisors said they welcome more informed clients, since they prefer to work with more educated people.

3% of advisors responded with “Other” and 8% of clients responded with “No challenge.”

INFORMED CLIENTS MEANS BETTER SERVICE

n=146 (Advisors stating clients are doing more research)

What advantages do informed clients create for you?

SMARTER CLIENTS MEANS SMARTER QUESTIONS

n=192

In what ways are client questions changing?

AS CLIENTS GET OLDER AND WEALTHIER, THEIR PERCEPTION OF SUSTAINABLE LOSS BECOMES MORE REALISTIC

n=192

We asked what loss percentage clients claim they can sustain on their KYC forms, versus advisors’ views on that number. Older clients look to advisors for riskless income options.

ADVISORS APPRECIATE LOW-RISK PRODUCTS

n=192

Q. Based on your experience with fund companies, do you perceive a move within products toward creation of too many low-risk offerings?

Yes	No
40%	60%

Of those who perceive a product shift to low-risk, 73% say this trend is dampening client comprehension of risk and reward, and 53% say the trend’s dampening their ability to provide the market returns necessary to meet client needs.

Read: Top tips from portfolio managers in 2014

Read: New program helps wealthy families manage money themselves

Read: 5 ways to make compliance an advantage

*Investment Insights is a new editorial research initiative by Advisor Group in which we ask our audience questions about both top-of-mind and evolving trend issues that impact their businesses. Responses from these studies, which will be conducted periodically for the next 12 months, will appear in Advisor’s Edge magazine, as well as Advisor’s Edge Report and here on Advisor.ca.

8% of advisors said they welcome more informed clients, since they prefer to work with more educated people.

3% of advisors responded with “Other” and 8% of clients responded with “No challenge.”

INFORMED CLIENTS MEANS BETTER SERVICE

n=146 (Advisors stating clients are doing more research)

What advantages do informed clients create for you?

SMARTER CLIENTS MEANS SMARTER QUESTIONS

n=192

In what ways are client questions changing?

AS CLIENTS GET OLDER AND WEALTHIER, THEIR PERCEPTION OF SUSTAINABLE LOSS BECOMES MORE REALISTIC

n=192

We asked what loss percentage clients claim they can sustain on their KYC forms, versus advisors’ views on that number. Older clients look to advisors for riskless income options.

ADVISORS APPRECIATE LOW-RISK PRODUCTS

n=192

Q. Based on your experience with fund companies, do you perceive a move within products toward creation of too many low-risk offerings?

Yes	No
40%	60%

Of those who perceive a product shift to low-risk, 73% say this trend is dampening client comprehension of risk and reward, and 53% say the trend’s dampening their ability to provide the market returns necessary to meet client needs.

Read: Top tips from portfolio managers in 2014

Read: New program helps wealthy families manage money themselves

Read: 5 ways to make compliance an advantage

*Investment Insights is a new editorial research initiative by Advisor Group in which we ask our audience questions about both top-of-mind and evolving trend issues that impact their businesses. Responses from these studies, which will be conducted periodically for the next 12 months, will appear in Advisor’s Edge magazine, as well as Advisor’s Edge Report and here on Advisor.ca.