Survey Uncovers Insights That Help Advisors Navigate The
Intersection of Client Experience and Competitive Advisory
Fees
State Street Global Advisors, the asset management business of
State Street Corporation (NYSE: STT), released the results of its
2024 Influential Investor Segment Study, a comprehensive analysis
of four investor groups demonstrating significant and enduring
growth. This study aims to equip advisors with invaluable insights
into the evolving needs and preferences of these high-potential
segments, empowering them to position their practices for long-term
success.
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As millennials accumulate wealth and
navigate increasingly complex financial needs, they become prime
candidates for formal advisory relationships. (Graphic: State
Street Global Advisors 2024 Influential Investor Segment Study,
September 2023)
“Our study identifies hybrid investors, women, Gen-X, and
Millennials, as pivotal pathways for advisors looking to
future-proof their business,” said Brie Williams, head of Practice
Management at State Street Global Advisors. “By strategically
integrating these high-growth investor groups into their client
segmentation strategies, advisors can enhance their ability to
attract and retain clients, gaining a distinct competitive
advantage.”
Three key themes emerged from the study across these investor
cohorts: a strong desire for collaborative relationships with
advisors, a heightened demand for modernized technology and tools,
and a clear expectation of competitive fees aligned with a
compelling value proposition.
By recognizing the pivotal role of client experience and
ensuring fees are aligned with the value of offered services,
advisors can unlock new avenues for growth and success in an
increasingly dynamic financial landscape. The study provides
insights and considerations to help advisors position their
offering to appeal to each segment.
Hybrid Investors
Hybrid Investors are a growing segment of investors who lean
into the duality of personalized human advice and the convenience
and cost-effectiveness of direct investing. As defined by this
study, hybrids maintain a relationship with a traditional advisor
alongside at least one self-directed account (self-service or robo
platform). When it comes to the importance of leveraging
technology, two-thirds indicate a good technology platform is
important when selecting an advisor.
“Hybrid investors value financial autonomy, yet they also
recognize the benefits of professional advice. While 67%
collaborate with an advisor on investment decisions, they remain
empowered to oversee a portion of their portfolio independently.
This collaborative approach allows them to benefit from their
advisor's guidance and expertise while maintaining a sense of
control over their investments,” said Williams. “In fact, 49% cite
the ability to control their investment decisions as a significant
advantage of using self-direct accounts.”
Since they have a high degree of confidence in selecting their
own investments, they also have a heightened awareness of how much
they paid for them, and the long-term impact of investment fees on
returns. High advisory fees are a hot-button topic for hybrid
investors, especially given their ability to readily compare costs
between managing their own portfolio and working with an advisor.
This poses a risk for advisors with non-competitive fee
structures.
The study revealed:
- 60% of hybrid investors compensate their advisors based on
assets under management
- 45% indicate they would leave or switch financial advisors if
those fees increased
- 43% state the cost savings of using self-directed accounts are
a benefit
- Significantly more hybrid investors (47%) than advised-only
(27%) and self-directed only (37%) have ETFs in their portfolios,
which tend to be lower cost and easier to trade
“Hybrid investors’ willingness to collaborate with an advisor
only goes so far, as this cohort is quick to reconsider the
relationship if they perceive subpar outcomes and higher fees,”
added Williams.
Millennial Investors
Born between 1981 and 1996, millennials represent the fastest
growing generation of investors, both in numbers and investable
assets. Growing up alongside the internet, smart devices and social
media, they navigate the digital landscape better than any
generation prior.
“Millennials are transforming personal finance, prioritizing
financial freedom and embracing innovative engagement solutions
tailored to their preferences. With their tech-savvy and
research-driven approach, they bring distinct expectations to the
table. To remain relevant, advisors must adapt to this evolving
landscape, leveraging customer experiences to meet the millennials'
needs,” said Williams.
Not surprisingly, 82% of millennials are hybrid or self-directed
only investors, underscoring the significant influence of
technology on their advisory preferences and financial decisions.
They are also avid users of a range of self-service investing
platforms. Nearly half of self-directed millennial investors rely
on online tools and calculators for their investment decisions.
As millennials accumulate wealth and navigate increasingly
complex financial needs, they become prime candidates for formal
advisory relationships. Despite their historically high rates of
direct provider platform use, 67% of advised millennials
collaborate with their advisor on investment decisions.
Additionally, advised millennials, more so than advised Gen X and
Boomer segments, are more inclined to involve their advisor in
day-to-day finances, including cash flow management, insurance,
private banking, and debt management.
Generation X
Gen X has long been underserved in financial services, despite
facing pressing needs for guidance. They stand at a crossroads,
balancing retirement planning, wealth preservation, eldercare, and
support for minor (and sometimes adult) children, making goal
planning a complex task.
Interestingly, less than a third of advised Gen X investors
received advanced planning services, and even fewer are coached in
an effort to remain financially secure. Despite their attempts to
manage it all, including their own investing, over 50% of Gen X
investors surveyed are self-directed, lacking the tools,
recommendations, or guidance they desire.
In fact, more self-directed Gen X investors (41%) cite “no
guidance or sounding board” as a shortcoming of self-service
brokerage platforms, compared to 33% of millennials and 26% of
Boomers.
What’s keeping them from engaging with an advisor? It comes down
to fees and the overall experience. Despite their apparent need for
professional investment guidance, the top reason cited for not
working with an advisor is the perceived lack of value for the fees
(45%). For Gen X investors who had previously worked with an
advisor, it came down to increased costs (37%) and unfulfilled
promises (20%) as the primary reasons for leaving, prompting them
to turn to online services and investment websites for market and
investment insight.
Women
Women are one of the fastest growing client segments due to the
booming SHEconomy, managing over $10 trillion in total US household
financial assets. With increasing financial influence and
independence, women want to be even more engaged in their
investment decision-making.
Interestingly, women in this survey were equally split between
advised and self-directed investors, with 50% being self-directed
and 50% being either advised-only (26%) or hybrid (24%).
Also notable was how thorough self-directed women are in their
approach to decision-making. Among self-directed investors, women
were much more likely than male investors to use online tools and
calculators to aid in their investment decisions. They were also
more likely than men to say that access to financial planning tools
was a benefit of using self-service platforms.
When choosing an advisor, women’s preferences were somewhat
similar to men’s. The overwhelming majority (69% vs. 63%) ranked an
understanding of their financial goals and comfort with the
advisor/client relationship (66% vs 62%) as the top two factors
when selecting a financial professional.
"Women investors are leading the charge towards financial
empowerment, yet many still strive for greater security. Their
journey is not one of despair, but of resilience in navigating the
unique challenges they face on the path to financial well-being,"
said Williams. "With a focus on retirement and long-term planning,
women investors are poised to seek advisors who prioritize
strategies addressing longevity risks and retirement income
solutions."
Yet when it came down to credentials, women tended to be more
choosy when it came to the factual attributes that make an advisor
look good on paper. Factors they say are extremely important
include:
- Strong credentials/knowledge/performance (62% women vs. 52%
men)
- Worked with a well-respected firm (51% women vs. 48% men)
- Referred from a trusted source (48% women vs. 40% men)
Advisors who make it past that scrutiny and prove their value
are rewarded with loyalty. According to the study, 46% of women
investors have been with their advisors for more than 10 years,
compared to 36% of male investors.
Common Financial Goal: Retirement Security
Having enough money to live throughout their retirement years
emerged to the top financial goals for each of these segments:
- Hybrids: 76%
- Millennials: 67%
- Gen X: 79%
- Women: 80%
It comes as no surprise that the majority sought an advisor's
help with retirement savings planning and retirement income
planning, as these were among the top advisory services used.
What’s Next
Demographic changes, particularly in reshaping engagement
standards, are setting expectations at a pace beyond traditional
financial services. To achieve sustainable business growth, how an
advisory practice adapts is crucial.
“The findings from our study underscore the opportunity for
advisors to embrace a growth mindset and tailor their services
around investors' preferences and objectives, rather than trying to
fit clients into existing offerings,” said Williams. “Changes in
consumer behavior are redefining expectations.”
Advisors who fail to recognize and respond to the potential
presented by these rapidly expanding investor groups risk letting a
significant portion of the market pass them by. By remaining
proactive and responsive to these evolving dynamics, advisors can
position themselves for long-term success and delight clients
throughout their financial journey.
Additional Resources
The 2024 Influential Investor Segment Study eBook provides a
comprehensive analysis of the findings.
For more insight on individual investors’ outlook for 2024, read
State Street Global Advisors’ Influential Investor Sentiment
Survey: Outlook on 2024.
State Street Global Advisors Practice Management landing page
provides leading-edge practice management research, insights, and
services to help advisors position their businesses for long-term
success.
From Skepticism to Strategy: Where Investors Can Find
Opportunities as Inflation Cools helps advisors and self-directed
investors better understand how they can position portfolios to
address top investment goals and concerns.
For more on State Street Global Advisors’ point of view on how
advisors can help clients remain confident during uncertain times,
read Market Volatility: A Relationship-Building Opportunity for
Financial Advisors.
SPDR’s PortfolioTM ETF suite is designed to provide investors
with greater choice in low-cost ETFs, with offerings priced as
little as two basis points.
About State Street Global Advisors 2024 Influential Investor
Segment Study, September 6 – 27, 2023
State Street Global Advisors, in partnership with A2Bplanning
and Prodege, conducted The Influential Investor Segment Study, an
online survey among a random sample of 1,503 individual investors
in the US. Investors surveyed in September 2023 were between the
ages of 27 and 77. Among the investors surveyed, participants fell
into the following demographic categories: 48% were male and 52%
were female; 33% were millennials; 34% were Gen X; 33% were
boomers. 31% held $250K–$499.9K in investable assets; 35% held
$500K–999.9K; 34% held more than $1M • 50% used a financial
advisor; 50% did not.
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About State Street Global Advisors
For four decades, State Street Global Advisors has served the
world’s governments, institutions and financial advisors. With a
rigorous, risk-aware approach built on research, analysis and
market-tested experience, we build from a breadth of index and
active strategies to create cost-effective solutions. As pioneers
in index and ETF investing, we are always inventing new ways to
invest. As a result, we have become the world’s fourth-largest
asset manager* with US $4.34 trillion† under our care.
*Pensions & Investments Research Center, as of 12/31/22.
†This figure is presented as of March 31, 2024 and includes ETF
AUM of $1,360.89 billion USD of which approximately $65.87 billion
USD is in gold assets with respect to SPDR products for which State
Street Global Advisors Funds Distributors, LLC (SSGA FD) acts
solely as the marketing agent. SSGA FD and State Street Global
Advisors are affiliated. Please note all AUM is unaudited.
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