Cost Transparency Key to FAs Obtaining New Clients
Clear communication about pricing structures is crucial for financial advisors seeking to attract prospective clients who are not currently using advisory services, according to a recent report.
Cerulli Associates, a Boston-based research firm, found that 46% of potential clients perceive a lack of clarity in the cost structure, making it difficult to determine what their advisors are charging them. This issue eclipses other complaints, with 28% of respondents believing advisors are too expensive and 20% finding it difficult to find a reliable advisor.
Only 11% of investors with an advisor believe that costs aren’t transparent, and just 12% believe they’re too high.
“Advisors must ensure their fee schedule is easy to understand and the services provided are outlined specifically so clients know exactly what they are paying for and how they will pay — while also understanding how clients wish to engage with their finances and with the advisory team,” Cerulli research analyst John McKenna said.
McKenna noted that advisors need to be transparent from the first communications with a prospect — and be prepared to adjust how they work with them.
“As more investors transition from being solo traders to seeking formal financial advice, they will want an advisor who understands their needs,” he added in the statement. “That begins with the advisor being open not only about how advice delivery is carried out, but also the methods through which it is delivered.”
Cerulli predicts that to compete for high-value clients, RIAs will raise fees for their smaller clients while lowering them for clients over $1.5 million.
Cerulli’s survey of approximately 2,000 financial advisors revealed that among those who charge fees based on assets under management, the average self-reported fee for clients with $750,000 was 103.7 basis points, compared to 88.1 basis points for those with $1.5 million in assets. Advisors provided average estimates for 2025 of 104 and 87.6 basis points, respectively.
Cerulli, in collaboration with research and marketing firm Marketcast, polled over 1,600 investors in the second half of 2023.