Planning's New Demographics

Advisor: Your Future is Fee-Based

In a new information age, your client’s success may also ensure your own

by Mitchell H. Caplan,

Mr. Caplan is CEO of Jefferson National. Visit

The advisor’s career track is evolving in ways that are materially different than just a few decades ago. Looking back to the 1980’s, the industry was dominated by stock jockeys buying and selling on commission.

Today, growing numbers of advisors are shifting towards comprehensive wealth management based on holistic financial planning and unbiased guided advice.

Likewise, clients are also evolving. With widespread access to the internet, the everyday investor now has an almost unlimited choice of market research, low cost financial transactions, and online planning tools. Portfolio management, and even some aspects of financial planning, have become commoditized solutions. This increase in clients’ connectivity and awareness will continue to transform the nature of the advisor’s role and the way they do business.

The Balance Shifts to Empower Consumers

The future is fee-based and the balance continues shifting in favor of the consumer. Perhaps there is no greater bellwether than the recent DOL fiduciary rule. It re-defines responsibilities and requires advisors in the retirement planning space to put their client’s best interests first.

A commitment that RIAs and fee-based advisors have been making from day one. Now, as more advisors across the industry from wirehouses to independent broker dealers are making this move toward a fee-based future, more consumers and product manufacturers continue to follow suit.

As their career track and their clients’ demands both continue to evolve, what is the advisor’s best approach to adapt? To help all advisors at every level gain greater insight on what matters most to their clients – to help them grow their practice for the future – Jefferson National fielded its second annual Advisor Authority Study, reflecting the viewpoints of more than 680 RIAs and fee-based advisors and more than 700 individual investors nationwide.

What Keeps Clients Up at Night?

Investors say protecting assets, healthcare costs, saving for retirement and taxes are top financial concerns – and taxes rise in importance for the most affluent.

For today’s investors, the challenge is how to strike a balance between saving for their future and managing today’s bottom line. And this creates even more pressure for advisors to stay focused on managing the market and keeping their eyes trained on the big picture.

When asked to rate clients’ top three financial concerns over the next 12 months, advisor’s show alignment with investors in many key areas. But our study also indicate that advisors are missing some of the most pressing issues that keep their clients up at night. This presents a unique opportunity to engage clients, address their concerns, ensure that they are heard, and ultimately deepen the relationship.

Rising Health Care Costs

Have you addressed your client’s concerns about rising healthcare costs? Our study shows that advisors underestimate clients’ concerns in this area, rating healthcare costs fifth (24%) while investors say it is tied for their number one concern (30%).

And keep in mind that healthcare costs are a top concern regardless of net worth, cited by Mass Affluent (30%), Emerging HNW (26%), HNW (35%) and Ultra HNW (31%).


Have you taken a more active role in managing taxes? Taxes can be your clients’ single biggest investment expense – especially for the high net worth, who can face rates as high as 40 percent or even 50 percent, when Federal and State taxes are combined. Yet advisors underestimate clients’ concerns about taxes, rating taxes seventh (22%) while investors rank taxes their number-three financial concern (26%). And taxes rise in importance with net worth, rated the second most important financial concern by Emerging HNW (29%) and Ultra HNW (32%).

Protecting Assets

Protecting assets are a top concern identified by both advisors and investors.

This is a meaningful opportunity for you to educate your clients on the causes of volatility and the importance of managing volatility. It is also an opportunity for you to demonstrate your value by explaining the proactive measures and innovative solutions you are using to protect your clients’ assets in the current volatile market.

What Clients Want?

As markets grow increasingly volatile and the world becomes increasingly complex, investors seek an experienced advisor who can provide holistic and personalized service – and one who will put their best interests first.

Perhaps there is no greater bellwether than the recent DOL fiduciary rule. It re-defines responsibilities and requires advisors in the retirement planning space to put their client’s best interests first

Experience Matters Most
When asked to identify the top three factors that influenced their decision to work with their advisor, investors rate “advisor experience/years of experience” as the number one-factor (46%) by a wide margin. You need to gain experience to earn a client’s trust. But younger advisors can still earn clients’ trust – and earn their business. One of the best tactics is to team up with more seasoned partners as part of a multi-generational practice, to build the right partnerships and engage the right experts. In fact, the importance of partnerships never stops—even for the most seasoned advisor.

Holistic Planning is Crucial
Investors rate “personalized advice for a holistic financial picture” the second most important factor (26%) influencing their decision to work with an advisor. And many advisors recognize the importance of a diversified service offering. Of the services offered by the RIAs and fee-based advisors in our study, the most popular are Financial Planning (80%), Portfolio Management (75%) and Estate Planning (56%). But less than half (46%) offer tax planning. Given investors’ strong concerns about taxes, advisors would be wise to strengthen their skills in this area – or partner with professionals who do.

Transparency is Key
Investors rate a “fee-based fiduciary standard” the third most important factor (24%). Notably, HNW investors give this a substantially higher rating (33%) – a crucial differentiator if your client base is affluent investors.

And as our study shows, transparency around fees, taxes and investing strategy is a priority for RIAs and fee-based advisors. More than two-thirds (68%) of advisors address fees in some way with their clients. Roughly two-thirds (65%) address taxes in some way. More than three-fourths (77%) will not make an investment unless they can effectively communicate the strategy to clients – or they know their clients understand it.

Relationships Matter
When engaging with their advisor, more than half (53%) of investors who have advisors say they want a high-touch approach. And when asked to name their preferred form of communication with their advisor, investors rate phone calls first (35%), face-to-face meeting second (34%), and email a distant third (14%). But preferences shift dramatically for the UHNW, with only 23% saying they prefer a High-Touch approach. For the most affluent investors, quality of communication is more important than quantity.

Technology Can’t Replace Guided Advice
While nearly four in ten (38%) advisors are confident that using Robo Advisors can provide proper management and protection in volatile markets, only two in ten (21%) investors are confident. Meanwhile, more than one third of both advisors (36%) and investors (35%) are not confident – meaning the jury is still out when it comes to Robo.

Bullish on Advice

RIAs and fee-based advisors are optimistic. Their top priority is the pursuit of profitability—and the push for new clients remains the top driver.

The most successful advisors are a step ahead, targeting a younger generation of clients, far more focused on retaining clients’ heirs, and investing in innovative marketing to build a durable franchise for the future.

Investors’ outlook is more tentative. But the good news is that investors who work with advisors are far more optimistic than those who do not. Facing uncertainty at home and abroad – as they try to manage their bottom line, their taxes and their plans for the future – many investors struggle to understand how they can control these complex dynamics. Yet, almost half of investors who have an advisor say they are optimistic, compared to roughly one third of investors who do not. Clearly, clients are bullish on advice.

Change is happening. Many believe financial advice is at a pivotal turning point. The truth is, we are in the midst of a long-term secular change. The future of financial advice is trending toward unbiased advisors who can have a real dialogue with clients and look at financial planning in a more holistic way.

As powerful forces drive change and disrupt the status quo, supporting a movement to greater simplicity, transparency and choice, this is fostering the creation of new products, new services and new business models. Advisors who evolve to align with client concerns and offer holistic guided advice will succeed; those who do not evolve will become irrelevant. Ultimately, by creating greater value to ensure your clients’ success, you are taking the most important steps to ensure your own. ◊