Articles for Advisors

How The Wealthy Respond To Inflation

Inflation is impacting everyone, even affluent households.  According to the latest report from the Bureau of Labor Statistics, the annual inflation rate at the end of May 2022 was 8.6%, the highest level since 1981, as measured by the consumer price index.  The common belief is that inflation impacts the middle and lower class more dramatically, but even wealthier households are feeling the pinch….and some of their reactions could even hurt the economy more.

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Which Investors Will Be Impacted By A Cryptocurrency Crash?

Cryptocurrency has been challenged in the past few months with Bitcoin, one of the most popular cryptocurrencies, struggling to stay above $20,000. 

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Investment Performance Expectations in 2022

In a year in which the stock market has already dropped significantly, the ability for a financial advisor to create a significant investment return in 2022 will be challenging.  What are the expectations of investors?  If the market is somewhat bearish, do investors still expect their advisors to have a positive investment return?

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Assessing Risk Tolerance in Times of Market Volatility

While there is still a debate as to whether or not 2022 is a recessionary year, the stock markets have been excessively volatile and mostly bearish.  How does that impact investors and what do financial advisors need to do to make their clients feel confident they are looking out for their best interests?

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Online Tools and Your Website: Worth the Investment?

Advisors must continually invest in their websites to ensure that they contain timely and interesting information for their existing and prospective clients.  One of the types of content included on many websites are digital financial planning tools.  While in most cases these tools are developed by outside software providers, advisors must continually license these tools and make sure they are working effectively.  Are these digital financial planning tools worth the investment that advisory firms must make to keep these planning tools up to date?

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Why Fire Your Advisor?

Changing or firing one’s financial advisor is not common.  In fact, only 14% of investors have changed or dropped having a financial advisor in the last 5 years, according to research conducted by Spectrem Group.  Younger investors are more likely to have made this type of change than older investors, primarily because they have not locked into a relationship and thus their loyalty is not as great.  Overall, research indicates that the longer the relationship has existed, the less likely it will be terminated.

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Is the Pandemic Over?

As mask restrictions begin to disappear, a new strain of Covid-19 is allegedly spreading across the country.  Will the pandemic ever end?  And what do investors think about Covid-19?  Is it still impacting their investment choices?

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Does Gen Z Really Dwell In Their Parent's Basement?

Gen Z refers to those individuals born after 1997 (it’s still unclear when Gen Z ends.). These individuals are still relatively young and most financial advisors don’t really think that they should focus on Gen Z.  But Gen Z is just beginning to join the work force and will be the investors of the future.  Understanding what drives them at a young age will allow financial advisors and providers to develop the products and services that will attract a new generation.

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Are You the "Go To" Advisor?

The wealthiest investors in the U.S., those with more than $25 million of net worth, generally use a multitude of professionals and financial advisors to assist with the management of their assets.  Is it important to be the “go to” advisor or is it OK to be just one of many?  Spectrem recently completed research with investors with more than $25 million of net worth and found that it is important to be the “go to” advisor, but that doesn’t mean it isn’t beneficial to be one of many.

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Who Invests in Crypto?

In recent weeks, cryptocurrencies have been somewhat volatile leading many to question the future of this relatively new, but increasingly popular, investment type.  Are cryptocurrencies merely a trend or an important component of the portfolios of affluent investors?

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Does Ukraine Matter to Investors?

When investors are asked to identify their international and national concerns, 73 percent indicate they are worried about the war in Ukraine and 70 percent are concerned about tensions with Russia, but do these concerns impact their investment decisions?

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Estate Planning for America's Wealthiest Investors

Estate planning is something that many investors avoid at all costs, after all, who wants to talk about death and dying? Skipping this important step in financial planning can have disastrous consequences for investors, including those investors at the highest levels of wealth. A lack of proper estate planning can result in estates potentially losing millions of dollars or struggling with being able to obtain access to millions.

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How Investors Are Dealing With Inlaftion

Inflation is taking a toll on all investors and is currently their greatest concern (79%) both personally and nationally.  Financial advisors should be reaching out to clients to discuss the impact of inflation on their portfolios and to provide some reassurance regarding how to deal with this issue.   Spectrem Group recently conducted research with investors with $100,000 to $25 million of net worth to understand their feelings regarding inflation.

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Wealthy Investors Not Significantly Impacted by Fuel Prices

Despite the more than 50% increase in fuel prices in recent years, most wealthy households have not changed their fuel consumption practices.  According to research recently conducted by Spectrem Group with investors with $100,000 to $25,000,000 of net worth, 84% of investors indicated that they have not changed their consumption of fuel despite rising prices. 

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Investors Don’t Really Understand Social/ESG Investing

Investors seem to be increasing their interest in social and ESG investing, however, their actual understanding of these types of investments is relatively weak.  Social investments started many decades ago and focused on excluding investments that supported “sinful” activities such as tobacco, alcohol and gambling. Since that time social investing has expanded and now focuses more on investing in companies that have strong environmental focuses as well as including social issues. To go even further, impact investing involves specifically investing in businesses that will benefit specific local communities.

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Is Investor Behavior Impacted By A Corporations Politics?

Florida’s Governor Ron DeSantis recently signed legislation that prohibited the teaching of sexual identity in grades K-3 in Florida public schools.  Many in the media and those against the legislation characterized this as the “Don’t Say Gay” bill. The Disney corporation announced that it was against this bill, causing outrage by many conservative parents and others who felt that it was not the role of Disney, known as the leader in children’s entertainment, to become involved in this issue.

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Liquidity, Longevity or Legacy? What Do Investors Choose?

Wealthy investors are often asked to identify their overall strategy for their assets based on the concepts of liquidity, longevity or legacy.  Liquidity is generally focused on the family’s spending needs for the next three years.  Longevity is the allocation of one’s assets to meet their needs throughout their lifetime, and Legacy is the desire to leave assets for one’s heirs and/or causes that they might care about.

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Wealthy Investors Not Really Impacted By Fuel Prices

Despite the more than 50% increase in fuel prices in recent years, most wealthy households have not changed their fuel consumption practices.  According to research recently conducted by Spectrem Group with investors with $100,000 to $500,000 of net worth, 48% of investors indicated that they have not changed their consumption of fuel despite rising prices.  

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The Disney Dispute - Investor Opinions on Corporate Attitudes

Florida’s Governor Ron DeSantis recently signed legislation that prohibited the teaching of sexual identity in grades K-3 in Florida public schools.  Many in the media and those against the legislation characterized this as the “Don’t Say Gay” bill.  The Disney corporation announced that it was against this bill, causing outrage by many conservative parents and others who felt that it was not the role of Disney, known as the leader in children’s entertainment, to become involved in this issue.

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How Much Should You Have In Your Emergency Cash Fund?

When economic and political times are uncertain, the role of a financial advisor is to assist clients in developing tools that will make them feel financially stable.  The most popular tool to establish financial stability is an emergency cash fund.  While advisors may believe these assets might be better off invested, most investors believe that having an emergency cash fund is critical.  In fact, 82% of investors with $100,000 to $25 million of net worth currently have an emergency cash fund, according to research recently conducted by Spectrem Group.

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Who Owns Bonds?

Traditional investment philosophy would lead one to believe that older investors are the most likely to own bonds as part of their investment portfolio.  This makes sense because older investors are generally more conservative and want to protect their investments.  But recent research conducted by Spectrem Group with investors with $100,000 to $25 million of net worth flips this logic on its head.

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How Do Wealthy Women Choose Advisors?

Whether it be as a widow, as a single woman or even as part of a joint decision with a husband or partner, women are increasingly important in the advisor-client relationship.  It is predicted that women will be more important in financial decisions in the future than men. 

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Number of Wealthy Households Continues to Increase

At the end of 2021 there were more than 12 million Millionaires in the United States.  This compares to only 10.5 Millionaires just two years ago.  This information is based on Spectrem Group’s annual market sizing of wealth households in the U.S.  

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Is "Satisfactory" Good Enough?

Financial advisors and their firms make significant investments into the communication materials they produce for investors.  While hard copy newsletters were the original communication tools, in recent years the modes of communication have expanded substantially.  Hard copy newsletters have been supplemented or replaced by electronic newsletters.  Additionally, advisors now produce blogs, videos and podcasts.  But do investors find all of these communications interesting?  Are the communications worth the effort?

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Who Needs an Advisor?

While more than half of investors currently use an advisor, a significant percentage of investors remain “advisor-less”.  Why do these investors avoid using an advisor and what could change their mind?

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Should Corporations Take A Political Stance?

In the past few weeks, Disney has taken a political stance regarding some legislation recently passed in its home state of Florida.  The legislation, which has been called the “Don’t Say Gay” legislation, has become quite controversial despite the fact that the word “gay” does not appear in the legislation.  The legislation prevents teachers from focusing on sexual issues in Kindergarten through 3rd grade.  Despite the mischaracterization of the legislation, many individuals in the LGBT community and other groups have brought significant pressure on Disney to stand up against the legislation.  The corporation now says that it may pursue litigation against the state due to legislation.  Those who support the legislation are now pushing boycotts against Disney.  

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Does ESG Investing Matter to Investors?

On March 22nd of this year, the SEC released standards for corporations of the required disclosures regarding climate related issues.  The Biden administration is focused on numerous environmentally related issues and presumes that investors are equally concerned about these issues when deciding how to invest their assets.  But do investors really worry about these issues when allocating their portfolios and making investment decisions?

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High Cash Levels Among Wealthiest Investors?

Is the volatility of the past few years causing wealthy investors to keep higher levels of their assets in cash and cash-based investments?  While it might be easy to believe the wealthy investors are keeping higher levels of cash in their portfolios, the reality is that they actually have less cash than just a few years ago.

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Do Providers of Wealth Management Have Greater Share of Wallet?

Financial providers are constantly working to differentiate themselves from their competition.  Consistent evolution of service offerings has become necessary as the financial landscape has changed dramatically over the past several decades.  Investors having access to information and DIY options regarding every aspect of their lives, including financial management, has made it even more critical for financial firms to understand what types of services they can offer that provide the added value investors are seeking.

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How Will I Get Rich? Does the Social Class You Were Born Into Still Impact Wealth?

One of the fundamental beliefs of the American Dream is that if you work hard, you can become wealthy.  While that is true for many of the Millionaires and Ultra-wealthy households Spectrem has interviewed over the decades, the number of households that become wealthy due to inheritance has increased substantially in recent decades.  When Spectrem first began in-depth research wealth, only 8-10% of individuals became wealthy due to inheritance.  Younger generations are much more likely to attribute their wealth to inheritance than those in the past.

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Focus On What Investors Want

The financial services business was built upon an investment management foundation.  For decades, individuals with significant assets did not have access to the tools or knowledge regarding how to invest their assets.  But in the past few decades, the abundance of online investment and financial planning tools have become readily accessible to most individuals.  At the same time, the size of the wealth markets has increased substantially due to greater access to investments and overall greater wealth within the country.  These changes have, however, changed the role of a financial advisor.  No longer are investors just seeking investment advice.  They are looking for more complex advice.  However, financial advisors are most comfortable providing investment advice.  This leads to significant gaps in the relationship between investors and their advisors.

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Personal Experience - Planning Decisions of Small Business Owner

Small business owners have unique and complex decisions to make regarding estate planning….and it’s easy for them to ignore these challenges as long as possible because they are busy running their business and because of the complicated decisions that need to be made as part of the process.  While Spectrem Group has done extensive research on investing and the estate planning process, having recently experienced this particular process brings clarity to how the decision-making really works and how financial advisors can assist with the process.

 

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“Wealth Manager?” “Financial Advisor?” “Financial Planner?” What Do Clients Want to Call Their Financial Advisor?

As the wealth management industry continues to evolve, the actual title of the primary advisor for investors has also changed throughout the years.  At the beginning of the century, most investors relied upon a full-service broker, who was generally called “my broker”.  But as online trading began to take over the role of the broker and holistic financial advice grew in importance, the name of what a financial provider was to be called also changed.

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Impact of Biden Administration on Investments

As Congress wrangles regarding the $1.75 trillion infrastructure bill, investors wonder about the ramifications of this bill on the economy and particularly on their investments.  While investors worry about issues from inflation to supply chains, the opinions of investors vary based upon their occupation.

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Inflation Fears of the Wealthy

Inflation, which defined the late 1970s, has once again reared its ugly head and is becoming a concern for Americans of all wealth levels.  CNBC reported on October 29, 2021, that headline inflation, including food and energy, rose at a 4.4% annual rate in September, the fastest since 1991.  Core inflation increased at 3.6% for the 12 months ending in September, also the fastest pace in 30 years.

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What Does ESG Mean to Investors?

ESG is a term that some investors are not very familiar with, yet the concept of investing in such a way that follows one’s moral, political, or social ideologies is desired by many wealthy investors.  Some may choose to specifically avoid certain types of companies or investments that negatively impact the environment or promulgate perceived social injustices.  Other investors may seek to invest in companies or countries that are seeking to solve the environmental or social concerns in various areas.  Many investors call this type of investing socially responsible investing, as ESG is typically a term used in the industry, not by investors.  What level of interest do wealthy investors have regarding this type of investing and how do investors typically choose to invest in this specific strategy?

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