Advisor discretion and why it matters to digital marketing


Friday, December 14, 2018 | By Tracy Needham

It’s more important than ever for sales and marketing teams to know who their advisors are – and that includes knowing how they make investment decisions. Over the past few years, regulatory and economic pressures have driven big change in the business models and practices of financial advisors, as a growing numbers of advisors:

  • Centralize and simplify their investment management by adopting home office and other models to allocate client portfolios
  • Join forces to create a team of advisors — who often delegate investment selection to an internal investment manager

The result has dramatically changed how advisors choose investments for their clients, essentially dividing financial advisors into two camps (regardless of channel):

Advisors who have discretion select the majority of their clients’ investments and allocate their portfolios themselves. While the number of advisors who choose the majority of their clients’ investments has fallen to just 36 percent of advisors, they’re a critical group for asset managers, since you can still directly influence their purchases and redemptions.

Advisors who don’t have discretion implement other others’ allocations and fund choices via home office and third-party models. This is the “new norm,” with two-thirds of advisors falling into this camp.

Our recent report 5 Ways to Win Over Advisors Who Have Discretion: What Advisors Do Online revealed whether or not an advisor has discretion is starting to impact online behaviors and preferences.

Differences that Matter to Advisors with Discretion
One example is the importance of tailoring the website experience to the funds on an advisors’ broker-dealer platform. Right now, advisors visiting asset manager websites usually have to wade through lists of funds, without knowing which ones are actually available on their platform.

No advisor likes to waste time reviewing funds they can’t buy, but advisors with discretion are much more likely to be evaluating funds they’re not familiar with. So personalizing the advisor website to show availability on their broker-dealer platform is particularly important to them—in fact, 40.5 percent of advisors who have discretion rated it as “very important” for asset managers to do.

As a result, Show Them You Know Their Needs by Tailoring Funds Lists is one of the five key strategies we discuss in the report that are helpful for all advisors but essential for pursuing advisors with discretion.

Advisors without Discretion are Still Important
While advisors with discretion are clearly important to pursue, you must still pay attention to advisors who delegate their investment decisions to models and other members of their team. After all, many of these advisors are affiliated with important home office partners who expect asset managers to continue delivering value for their advisors.

Also, “no discretion” doesn’t automatically mean “no influence” – especially if the advisor is choosing which third-party model to use, or his opinions carry a lot of weight with the internal investment manager. In fact, you can indirectly influence investment decisions by influencing choice of, or adjustments to, their models.

In short, industry trends are driving advisors into two camps—those who do and those who don’t have discretion—with increasingly distinct online needs and preferences. If you can leverage these distinctions to deliver more helpful and relevant digital experiences to both groups of advisors, your firm will have a competitive advantage that drives higher sales, loyalty and advocacy.



Asset Management, Research, Analytics, and Consulting