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Clients Want Simpler Financial Lives But Transition Pain Is Deal Breaker

Tom Burroughes

19 June 2019

Almost half of affluent US individuals say they want to use one institution for the bulk of their financial needs but are dragging their feet in doing so, with the pain of onboarding being one of the deterrents, a survey finds.

The duplication costs of using several providers to handle financial affairs can mount up, but people are not always as able and willing to consolidate their arrangements as they would like, according to Cerulli Associates, the research firm.

A study shows that 49 per cent of respondents said they would prefer to use a single institution. This preference is strongest among investors under age 30 , before tapering off among older cohorts, but stabilizing at around 46 per cent for respondents over age 50.

The findings may not map entirely with the views of high-end HNW and ultra-HNW individuals in the US and elsewhere, because they typically use several providers, sometimes in different countries, to handle complex affairs. Even so, the frictional costs and pain of consolidating relationships could also deter such people from simplifying their financial lives.

A headache is the pain of being taken on board by a firm in an age of ever-rising compliance regulations.

“While the idea is appealing, the steps needed to get there are not. Creating a path of least resistance is crucial for walletshare growth,” Scott Smith, director of advice relationships at Cerulli, said.

“Providers committed to growing walletshare should explore how they can use technology to complement asset transition specialists to help shepherd investors through this process.”

Overall, 27 per cent of affluent respondents indicated that the ease and convenience of doing business is their reason for wanting to centralize assets with one financial provider.

A separate but related issue, as reported here and here, is how firms are fretting over whether they will be able to retain the custom of their clients' children in future. Again, while the dynamics may be slightly different for UHNW individuals and members of family offices, figuring out how "sticky" clients and their families are is a concern for providers. With an estimated $30 trillion due to be transferred to the next generation in coming years, the habits of upcoming wealth owners is a big discussion point for the industry.