Do you think your financial adviser doesn't really deserve the
fee you shell out? If yes, you are definitely not alone with this
view. At least that is what BlackRock (
BLK
) concluded based on an investor horizons survey in the U.K. that
showed more than two-thirds of the people surveyed were not willing
to pay for financial advice. More interestingly, a majority of them
held the opinion that the advice was not worth their money even if
they were assured about the adviser's qualifications, transparency
and impartiality. This clearly does not bode well for the likes of
BlackRock and State Street (
STT
) who make a large chunk of their revenues from investment advisory
fees.
We maintain
a $213 price estimate for BlackRock's stock,
which is at a premium of about 10% to the current market price.
See our complete analysis of BlackRock's stock
here
BlackRock surveyed 2,031 individuals in the U.K. to gauge
their preference for financial advice. And the results showed that
most of them are averse to the idea of consulting a professional
adviser about their short-term and long-term financial goals. A
good 65% of the individuals did not want to pay for financial
advice. And this number improved only slightly to 52% when
they were assured of the adviser's qualifications, impartiality of
advice and of transparency in fee structure.
In what emerges as a worrying pattern, the survey results show a
widespread lack of trust among retail investors towards financial
advisers. While poor returns from financial markets in recent years
have definitely contributed to the loss in confidence, the
increasing pressure on advisers from financial firms to draw in
more customers following the crisis can lead to a lack of
personalize attention in meeting financial objectives.
There is, thankfully, still some hope for the financial advisory
firms to salvage the situation and regain investor trust. Fees from
advisory services have remained low in recent years as investors
choose to stash money in savings accounts rather than look at
investment options.
But there is a huge potential market for the advisory firms -
something demonstrated by the results of the same survey that show
that only about 21% of the people actually opt for financial
advice. It's time the advisory firms realized the importance of
this and put their backs into making the clients understand what
they stand to gain by seeking financial advice.
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