At lower levels of personal wealth, the role of a financial advisor becomes problematic for an investor.
Spectrem’s quarterly series of reports on wealth examines investors with a net worth between $100,000 and $1 million. Known as the Mass Affluent, these investors indicate that many do not use a financial advisor because they are uncertain whether they need to based on their level of wealth.
Spectrem’s Advisor Relationships and Changing Advice Requirements shows that almost 40 percent of Mass Affluent investors do not use a financial advisor. Another 33 percent only use an advisor for special situations, such as an inheritance, or for retirement advice.
Among those Mass Affluent investors who use advisors, they still handle almost 60 percent of their assets themselves, and only 15 percent is turned over to an advisor for investing.
Twenty-seven percent of Mass Affluent investors cannot afford a financial advisor, while 36 percent don’t think a financial advisor would be looking out for their best interests. Thirty-one percent don’t believe their asset level is worthy of the attention of a financial advisor, and 28 percent believe they can do a better job of investing their funds than an advisor could do.
Of the Mass Affluent investors who use advisors, 69 percent are satisfied with their advisor (a drop from 72 percent in 2013) and 38 percent have been with their advisor for at least 10 years. Fifty-seven percent would recommend their advisor to friends and family, and 50 percent would move with their advisor from one firm to the other if the situation arose.
Almost half (48 percent) of Mass Affluent investors found their primary advisor through a referral from friends or family members. Less than one-quarter (23 percent) believe the cultural background of their advisor needs to be similar to their own.
Seventh-seven percent of Mass Affluent investors believe their financial advisor should have professional registrations and licenses.
For more information on the Mass Affluent, click here