Sometimes pursuing prospects for new business seems futile. It may seem that there are just too many advisors and investment companies trying to take a piece of a pie that is just too small. But at Spectrem Group we know that this is not true. The largest opportunity for financial advisors lies in a relatively untapped market. That market is the “self-managed” or “self-directed” investor.
Why would this be the largest opportunity? Clearly these investors have chosen not to use a financial advisor. Changing their outlook is basically a waste of time. Right?
But our research indicates otherwise. Today, approximately 38% of investors define themselves as “self-directed”. Now that doesn’t always mean that these individuals never use an advisor…because more than 70% of investors indicate they have a financial advisor. Being self-directed is often a perception of how the investor makes decisions and how much (or little) he or she relies upon the opinion of an advisor. Not surprisingly, the number of “self-directed” or “self-managed” investors decreases with both age and wealth.
Why do we believe there is opportunity with this group of investors? Because in many cases these investors feel they don’t have enough assets to merit the advice of a financial advisor or they simply don’t really know how to find a financial advisor. Maybe they are busy? One of the largest reasons for self-managed investors to reach out to an advisor is because they simply get tired of managing their assets on their own. Additionally, our research also shows that once investors reach a point in which their expenses (children?) decrease, they become more interested in seriously planning for their retirement. Another reason to find an advisor is a financial windfall…perhaps an elderly parent leaving an inheritance of some type. One of the most intriguing opportunities is with self-managed investors that would hire an advisor if they felt they could get a fair price.
Spectrem has identified how to actually attract these investors in our newest Market Insights report, Converting Self-Managed Investors. All of our recommendations are substantiated with data from our ongoing research.
As you will see in the report, establishing trust is the most important factor. If you have additional ideas or experiences on how to establish trust, let us know.
It’s a critical time for financial advisors to reach out to the large number of investors who are potentially at a financial crossroad due to a fluctuating market.