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4 Ways for Financial Planners to Appeal to DIY Investors

Mac Gardner October 29, 2021

DIY Investor Looks at Online Investments

Nothing has accelerated the reshaping of the investment industry quite like the recent pandemic. The business has been transformed from a largely local endeavor—where most practices focused on developing and strengthening local relationships—into a virtual model where eight in 10 financial professionals reported optimism in their ability to service clients remotely.1

But beyond the servicing of existing clients, the pandemic also brought about a rise in consumers who were willing to dive into the investment market on their own. These do-it-yourself investors have resulted in the growth of trading by individuals accounting for a larger chunk of market activity than at any other time during the past 10 years, as well as being responsible for an estimated 19.5 percent of U.S. equity trading volume in 2020, 4 percent more than in 2019 and double that of 2010.2 In fact, robo-advisors managed $460 billion in 2020—a 30% increase from 2019—and this figure is expected to grow to $1.2 trillion by 2024.3

DIY Investors Are Looking for Advice

While these self-directed investors learned many things from their efforts to beat the market, key takeaways also included the realization that their investments often required constant attention and that many of the tools at their disposal were fairly limited. So, it’s not unusual to find that many do-it-yourself investors have decided they want—and need—professional help.

According to a Cerulli Associates research study from October 2020, 40 percent of U.S. investors surveyed said they need more advice. Those who said they were willing to pay a financial professional rose to 56 percent, up five percentage points from 2019. And 82 percent of those who are paying for financial advice said that it’s worth the price.4

In fact, stock investors who work with a financial professional were more than twice as likely to say they are very confident they have the best investment strategy compared with those who are investing on their own.5

Financial professionals can make small adjustments to their practice to appeal to DIY investors, and add value in the process. The following are four ways to appeal to self-directed clients.

Make Sure Your Digital Game Is on Point

Attracting clients who are used to investing online means they’ll have certain expectations for your firm’s digital capabilities. Financial professionals who want to attract this audience will not only need to meet these investors on the channels that matter to them, but they’ll also want to make sure they have a strong digital brand.

In a recent study6 Fidelity conducted during the pandemic, of the end-investors who were newly advised or had recently switched advisors, 34 percent mentioned that they use social networking sites, and 29 percent used online search to find their advisor. This compares to just four percent using social networking sites and 8 percent using online search pre-pandemic.

And because so much of our lives is now lived online, consumers have high expectations when it comes to their digital experience. It will take time, but by making the right investments in technology, you can build the support system that lets you deliver an exceptional customer experience.

Key capabilities include allowing clients to aggregate accounts to see the full picture of their portfolio, the ability to run scenarios demonstrating the strength of their financial plan, and a portal to give the client 24/7 access so they can keep an eye on performance.

Lead with Financial Planning

Individual investors who have been seeing some success may have come to a point where they are looking for advice on how to move forward with the wealth they have accumulated. This is where you can demonstrate the power of financial planning.

Talk to these clients about their investment strategy. If they did not have specific goals in mind for their DIY portfolio—aside from high earnings performance—putting a financial plan in place will provide structure. These investors may have started out with the simple objective of making money—now it’s time to establish the end game of what they hope to achieve.

Financial planning provides a great value proposition. When you lead with planning, you can differentiate your practice based on your mission and vision, your experience serving similar clients, your specific areas of expertise, and anything else that makes you unique as a planner. This will help your closing rates and bring in more business.

Leverage Your Expertise

Another way to attract those clients who are looking for the human touch is to demonstrate your expertise.

As a trained professional who understands the investment and financial planning industry, you can serve clients in ways that robo-advisors can’t. Through human interaction, you can quiet panic, respond to market volatility, and offer trusted, personalized advice in ways that DIY platforms are unable to.

Leverage this human element to educate clients and show that you have their best interests at heart.

It Doesn’t Have to Be All or Nothing

Investing is a hobby for many DIYers. You may run into prospective clients who want the advice of a financial professional, but don’t want to hand over complete control.

There are many ways to work with them so they can continue to manage part of their portfolio. Perhaps you split things up so they manage investments that will pay for short-term goals, and you will focus on the long-term needs like retirement or legacy.

Perhaps you structure their portfolio so you are managing the funds necessary to meet their goals, but they have an overflow account they can continue to invest autonomously.

Or they may just want your opinion and advice on their continued DIY investment strategy. Creating a regular meeting schedule to facilitate those conversations will bring them in initially with the likely result being that they will come to you for additional needs down the road.

Whatever the course your client is most comfortable with, be sure to give them the flexibility to enjoy their interest in investing.

Any Participation Is Good Participation

One of the cool things about accessibility to DIY investment options is that it underscores the importance of putting your money to work for you.

While a robo-advisor may help get individuals to develop good savings habits and an understanding of investing, working with a trusted financial professional is still the best path for investors to gain authentic, personalized service. This becomes even more important as life gets more complicated and financial needs gain an emotional component.

These needs underscore the importance of establishing advice relationships with younger investors, often before substantial wealth accumulation. The more clients need help sorting out competing financial priorities, the more valuable your expertise.

To learn more about attracting DIY investors, watch our panel webinar replay, Prove the Power of Planning to the Do-It-Yourself Investor.

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

The views and opinions expressed by this blog post guest are solely those of the guest and do not necessarily reflect the opinions of eMoney Advisor, LLC. eMoney Advisor is not responsible for the content, views or opinions presented by our guest, nor may eMoney Advisor be held liable for any actions taken by you based on the content, views or opinions of the guest.

Sources:

1 DeWitt, Peter. “COVID-19 Social Distance and Distribution: Advisor Survey Summary of Results.” LIMRA, Oliver Wyman, Insured Retirement Institute, NAIFA, 2020. June 28. https://www.myirionline.org/docs/default-source/default-document-library/0628_advisor-report_covid19_social-distance-distribution.pdf.

2 Osipovich, Alexander. “Individual-Investor Boom Reshapes U.S. Stock Market.” Wall Street Journal, 2020. August 31. https://www.wsj.com/articles/individual-investor-boom-reshapes-u-s-stock-market-11598866200

3 Lee, Nathaniel. “Why Robo-Advisors Are Striving toward a ‘hybrid Model,’ as the Industry Passes the $460 Billion Mark.” CNBC, 2021. April 12. https://www.cnbc.com/2021/04/12/why-robo-advisors-may-never-replace-human-financial-advisors.html

4 The Cerulli Report, “U.S. Retail Investor Advice Relationships 2020, Accentuating the Value of Advice,” Cerulli Associates, October 2020.

5 Crabtree, Steve. “Investors With Advisers More Confident Amid COVID-19.” GALLUP, 2020. November 12. https://news.gallup.com/poll/323468/investors-advisers-confident-amid-covid.aspx.

6 “COVID-19: Insights Beyond the Curve.” Fidelity Investments, September 2020

About the Author

Mac Gardner has served in the financial services industry for more than 20 years. His passion for financial literacy led him to publish his first book, “Motivate Your Money!” in 2013. As his family grew and his clients began to ask him for ways to teach their kids about managing money he decided to use elements from his first book to develop a financial literacy platform for young children. The Four Money Bears represent the four basic functions of money. When children gain exposure to money management skills at an early age they are likely to develop healthy financial planning habits as adults. Mac is a true believer in the power of stories. He wants every child to know the story of “The Four Money Bears” and the benefits of sound money management for generations to come.

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Welcome to
Heart of Advice

a new source of expert insights for
financial professionals.

Get Started

Tips specific to the eMoney platform can be found in
the eMoney
application, under Help, eMoney Advisor Blog.