Markets in a Minute

Decision Paralysis: The Rise to One Million Investment Choices

Published

4 months ago

January 4, 2024

Decision Paralysis: The Rise to One Million Investment Choices

By 2031, there could be one million managed investment products. As the number of investment choices grows, investors are suffering from decision paralysis.

We partnered with Morningstar to show the rise in investment products over time, and how financial advisors can help.

Investment Product Growth Over Time

There were just over 30,000 managed investment products in 2002, but the choices grew rapidly in the years that followed. As of June 30, 2023, there were more than 742,000 products available.

Year	Number of Managed Investment Products
2002	31,470
2003	66,225
2004	96,050
2005	133,967
2006	175,001
2007	221,417
2008	276,115
2009	299,882
2010	332,693
2011	371,224
2012	411,414
2013	450,744
2014	496,460
2015	539,013
2016	573,999
2017	615,025
2018	647,483
2019	665,622
2020	688,700
2021	713,635
2022	735,474
2023	742,715
2024P	790,018
2025P	818,789
2026P	848,608
2027P	879,512
2028P	911,542
2029P	944,739
2030P	979,144
2031P	1,014,802

Source: Morningstar, 2023 data is as of June 30. Managed products include closed end funds, collective investment trusts, exchange traded funds, global restricted funds, hedge funds, insurance product funds, models, open-end funds, separate accounts, UK LP subaccounts, VA subaccounts, and VL subaccounts.

In terms of the different product types, open-ended mutual funds are the most common. However, ETFs have seen the highest growth rate over the last two decades.

Growth rates for all managed products in total were the highest in the early 2000s, but the number of products has continued to grow in recent years. The projection of one million products by 2031 assumes the compound annual growth rate of 3.64% from 2017 to 2022 continues into the future.

Enjoying this content? Dive into more insights in the Voice of the Investor Report:

Overcoming Decision Paralysis

People have access to more investment products and more advice than previous generations, but this doesn’t necessarily translate to more knowledge. Instead, this can lead to confusion and decision paralysis. In fact, 26% of people say they are uncomfortable making investment decisions, primarily due to a lack of knowledge.

Notably, investors don’t view advisors as being significantly more valuable than other information sources.

Source	% Who Find Source Very/Extremely Valuable
Professional advisor	57%
Investment or trading platform/website	55%
Accountant or tax advisor	53%
Business news e.g. Wall Street Journal	50%
Financial websites e.g. Yahoo Finance	49%

Source: Morningstar’s 2023 Voice of the Investor Study. The study is based on 2,003 U.S. adults who were not currently employed as a financial advisor.

However, the perceived value of advisors increases substantially once an investor begins working with one.

Status of Advisor Relationship	% Who Find Advisor Very/Extremely Valuable
Do not work with an advisor (n=1,142)	31%
Work with an advisor (n=861)	90%

To help combat decision paralysis, advisors can provide actionable insights and curate options for investors. Want to learn more about today’s investors and their unique needs?

Download Morningstar’s Voice of the Investor report.

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Markets in a Minute

The Top 5 Reasons Clients Fire a Financial Advisor

Firing an advisor is often driven by more than cost and performance factors. Here are the top reasons clients ‘break up’ with their advisors.

Published

2 weeks ago

April 15, 2024

Dorothy Neufeld

This circle graphic shows the top reasons for firing a financial advisor.

The Top 5 Reasons Clients Fire a Financial Advisor

What drives investors to fire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for firing a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients fire an advisor to provide insight on what’s driving investor behavior.

What Drives Firing Decisions?

Here are the top reasons clients terminated their advisor, based on a survey of 184 respondents:

Reason for Firing	% of Respondents Citing This Reason	Type of Motivation
Quality of financial advice and services	32%	Emotion-based reason
Quality of relationship	21%	Emotion-based reason
Cost of services	17%	Financial-based reason
Return performance	11%	Financial-based reason
Comfort handling financial issues on their own	10%	Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven.

Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals. Additionally, wealthier, and more financially literate clients are more likely to fire their advisors—highlighting the importance of understanding the client.

Key Takeaways

Given these driving factors, here are five ways that advisors can build a lasting relationship through recognizing their clients’ emotional needs:

Understand your clients’ deeper goals
Reach out proactively
Act as a financial coach
Keep clients updated
Conduct goal-setting exercises on a regular basis

By communicating their value and setting expectations early, advisors can help prevent setbacks in their practice by adeptly recognizing the emotional motivators of their clients.

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Markets in a Minute

The Top 5 Reasons Clients Hire a Financial Advisor

Here are the most common drivers for hiring a financial advisor, revealing that investor motivations go beyond just financial factors.

Published

2 weeks ago

April 15, 2024

Dorothy Neufeld

This circle graphic shows the top reasons for hiring a financial advisor.

The Top 5 Reasons Clients Hire a Financial Advisor

What drives investors to hire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for hiring a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients hire a financial advisor to provide insight on what’s driving investor behavior.

What Drives Hiring Decisions?

Here are the most common reasons for hiring an advisor, based on a survey of 312 respondents.

Reason for Hiring	% of Respondents Citing This Reason	Type of Motivation
Specific goals or needs	32%	Financial-based reason
Discomfort handling finances	32%	Emotion-based reason
Behavioral coaching	17%	Emotion-based reason
Recommended by family or friends	12%	Emotion-based reason
Quality of relationship	10%	Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While financial factors played an important role in hiring decisions, emotional reasons made up the largest share of total responses.

This illustrates that clients place a high degree of importance on reaching specific goals or needs, and how an advisor communicates with them. Furthermore, clients seek out advisors for behavioral coaching to help them make informed decisions while staying the course.

Key Takeaways

With this in mind, here are five ways advisors can provide value to their clients and grow their practice:

Address clients’ emotional needs early on
Demonstrate how you can offer support
Use ordinary language
Provide education to help clients stay on track
Acknowledge that these are issues we all face

By addressing emotional factors, advisors can more effectively help clients’ navigate intricate financial decisions and avoid common behavioral mistakes.

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