Some statistics merely show what we already know, while others take us completely by surprise.
Knowing the complexity of the financial and investment markets, and the wide range of investment opportunities that could increase the portfolio of an affluent investor, it is surprising to find out just how many wealthy individuals do not take advantage of the services of financial advisors.
Spectrem’s Perspective Lost Without an Advisor: How to Attract Advisor-Less Investors looks from several different angles at those investors who do not avail themselves of advisor services.
The research, which studied investors with a net worth between $100,000 up to $25 million, compares investors who use advisors to those who do not. It also separates advisor-less investors into two groups – those who think they can do a better job than an advisor and those who do not use an advisor due to cost considerations.
Overall, 23 percent of investors do not use a financial advisor at all. Seventy-seven percent do use an advisor to some extent, obviously some more than others.
Looking at all investors, 20 percent say cost is a reason for not having an advisor, while 53 percent believe they can do a better job of investing, whether they have a financial advisor or not. There are other reasons listed for choosing not to have an advisor, including not believing that a financial advisor would have the investor’s best interests at heart (50 percent), believing the investor’s level of assets don’t warrant an advisor (11 percent) and those who use family or friends for assistance (9 percent),
Interestingly, 13 percent report not using an advisor because they don’t know how to choose one.
Looking more specifically at the investors who do not use advisors, those that think they can do a better job investing are much older (average age: 62) than those who do not want to pay for an advisor (average age: 55).
For investors who do not use financial advisors, convincing them to change their mind is not going to be an easy task.
Among those who think they can do a better job, 70 percent say it is unlikely or very unlikely they will begin to use an advisor any time soon. Only 7 percent of that segment believe it is either likely or very likely they will use an advisor in the future.
Those who say it is too expensive are more flexible, with only 34 percent saying it is unlikely or very unlikely they will begin to use an advisor. In fact, 14 percent of those who say hiring an advisor is too expensive believe they are likely or very likely to hire one in the future.
“Keep in mind that the advisor-less investors who think advisors are too expensive are the ones most likely to change their mind about accepting advice,’’ said Spectrem President George H. Walper, Jr.
There are very few situations in which investors who think they can do a better job than professional advisors might be convinced to use an advisor. The best bet is if the investor just gets tired of managing their investments themselves (29 percent).