Are financial advisory firms giving consumers the services they truly want?
1. Tax planning is in the highest demand.
This was a change from earlier studies, Herbers said.
"When we run these studies, it usually is retirement, investment management and cash flow [that are at the top] and the tax planning falls somewhere below," Herbers said. "But this year that wasn't the case."
Herbers said she didn't know exactly what caused the change but pointed out that economic upheaval can change consumer behavior.
"We had a 10 year bull market, and then we had the bear in 2020, and then it's been a little chaotic between now and the beginning of COVID," she pointed out.
2. Many firms don't offer all these services.
Although 90% of consumers with over $250,000 in assets said they wanted tax planning, only 73% of firms in the survey reported offering it.
"We have advisory firms out there that aren't offering investment management at all and only offering tax planning," she said. "We've got advisory firms out there that are offering tax planning and investment management, but they aren't even touching retirement planning."
There is, in fact, a gap in both retirement planning and tax planning, she said.
"So what consumers are saying is: 'Listen, we've got investments covered. We've got insurance covered. We've got all of the other areas of planning covered but there is still room for more financial advisors to enter into the retirement planning space and enter into the tax planning space to meet consumer demand.'"
Herbers sees that presenting "huge opportunities for all the combinations of advisory firms out there to grow."
3. Close rates for all but the highest-growth firms are taking a hit.
Although the top organically growing advisory firms said they closed on seven of 10 prospects, that number is just three of 10 among average firms, according to the study.
Those firms that offer life planning, meanwhile, convert prospects to clients at only a "10% clip," according to Herbers & Co.
"We would generally see a close ratio above 50% … [but,] across advisory firms, especially in the last three years, we have seen that close ratio slowly falling," she said.
"And I think that that's because of COVID," she said, explaining: "Consumers became more aware of financial planning … because of all of the turmoil that we were having economically because of [low] interest rates. We also had consumers who had money in their hands."
Over the past three years, "potential clients were reaching out for financial advisors, but they weren't just getting a referral and going to the advisory firm that their friend works for…. What they were doing is they're shopping advisory firms." And that stands to have a major impact on close ratios, she noted.
