Last updated: 23:28 / Wednesday, 6 July 2016
Cerulli Associates

Digital Advice Could Offer a Solution For U.S. Consumers With Too Small Portfolios For Financial Advisors

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Digital Advice Could Offer a Solution For U.S. Consumers With Too Small Portfolios For Financial Advisors
  • The mass market and the lower end of the middle market are underserved by financial advisors
  • Combining human and digital advice allows an advisor to scale their practice in such a way that he or she can profitably manage the smaller accounts of mass-market consumers

According to new research from Cerulli Associates, digital advice could offer a solution for U.S. consumers with portfolios too small to attract the attention of financial advisors.

"The mass market and the lower end of the middle market are underserved by financial advisors," states Tom O'Shea, associate director at Cerulli. "A vast majority of consumers do not possess the assets necessary to merit attention from financial advisors."

"Digital advice innovation presents an opportunity to enhance the efficiency of advisors servicing small accounts," O'Shea adds. "Combining human and digital advice can strengthen the fiduciary foundation of the client recommendations. This combination also allows an advisor to scale their practice in such a way that he or she can profitably manage the smaller accounts of mass-market consumers."

"Almost 90 million U.S. households have investable assets of less than $100,000," O'Shea explains. "Yet, only 8% of financial advisors treat this segment as their core market. The overwhelming majority of advisors target clients with higher levels of investable assets."

"It is not that advisors are unwilling to help small investors," O'Shea continues. "Rather, they cannot figure out how to make money when working with them, leaving investors to go it alone or rely on guidance provided by direct-to-consumer firms."

 

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