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Cerulli: Too Much Product Choice Leads Retail Investors Astray

By Alex Padalka June 25, 2018

Financial advisors who offer their clients and prospects a myriad of options of investments and services may want to think again. Too much choice leads retail investors to revert to poor decision-making, according to a recent report from research firm Cerulli Associates.

Retail investors have access to a wide array of products and services as well as “nearly unlimited data,” Scott Smith, director at Cerulli, says in a statement accompanying the report. But that abundance of choice can cause investors to become overwhelmed instead of informed, he says. In the end, investors with too many options end up struggling to pinpoint the right solution for their own specific needs and goals, according to Smith.

Financial services providers can overcome this predicament by engaging in “active architecture,” essentially limiting what they offer to each client segment by harnessing information from each interaction they have with clients, according to Smith.

"We believe providers can optimize their own success and the outcomes of their investors by segmenting their addressable market through an advice orientation lens, with a choice architecture overlay, to help expediently guide prospective clients to the platform and product solutions most likely to best meet their preferences," he says.