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Cerulli: Wealthy Investors Prefer Advisors at Big Firms

Investors have a strong preference for advisors at large national banks and broker/dealers, especially the high-net-worth.  

Recent movement among financial advisors seems to lean towards the registered investment advisor model, with many large wirehouse and regional brokerage teams breaking away and starting their own independent firms.

Just this week, a team of Merrill Lynch advisors with a reported $491 million in assets left the wirehouse to launch their own RIA in Southern Pines, N.C. Another North Carolina duo of advisors with $700 million in client assets broke away from Merrill to join Sanctuary Wealth’s independent platform.

But a new survey from Cerulli Associates indicates a different preference among investors. Thirty-nine percent of advised investors across all wealth tiers said they prefer to work with an advisor who is employed by a national organization, whether that’s a bank, broker/dealer or asset manager. That was also the top preference for investors who are not currently working with an advisor, at 32%.

That choice was even more pronounced among more affluent investors. Among those with $5 million or more in investable assets already working with an advisor, 45% prefer to work with those employed by a large firm. Among unadvised investors, 37% of those with $5 million favor those advisors, 38% of those with $2 to $5 million have that preference, and 40% of those with $1 to $2 million lean that way.

The Cerulli report attributes these results to the fact that the wealthy tend to skew older and have a greater comfort level with established brands.

cerulli study advisor interactions

Meanwhile, just 18% and 19% of advised and unadvised investors, respectively, prefer to work with an advisor who owns and operates their own locally-based practice. Among the largest wealth tier (more than $5 million in assets) that is currently unadvised, that drops to 11%.  

“These overall preference levels present a bit of a challenge to emerging registered investment advisors (RIAs) and independent broker/dealer (IBDs) advisors, as they rarely possess high levels of unaided awareness among prospective clients in their periods of critical advice need,” says Scott Smith, director of advice relationships at Cerulli.

These local practices have a weaker showing among the less affluent who already have an advisor, with just 8% preference among those with $100,000 to $250,000, which Cerulli states reflects “the challenge local businesses have competing with major brands for new client acquisition.”

Online-only advisors were the least favored across the wealth spectrum, with just 1% of advised respondents and 5% of unadvised respondents choosing them.

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