No one is certain what the financial advisor term “wealth management’’ really means (what its value is), but investors certain have an idea who is worthy of accessing wealth management services (what its price might be).

The terminology of financial advisory services is confusing. There are advisors with certifications, advisors without certifications, advisors with numerous certifications. There are brokers and advisors and planners and managers and no one knows precisely what any of those terms mean.

But investors have some idea, even when no precise definition of any of those terms exists.

According to Spectrem’s new study Defining Wealth Management, most investors believe there is a wealth threshold related to accessing wealth management services, and most investors know whether their own net worth makes them worthy.

“Perhaps because the word ‘wealth’ is included, investors think that there is a marker, a minimum net worth, which an investor must have to make wealth management services worthwhile," said Spectrem president George H. Walper Jr. said. “This study digs into the perceptions investors have about wealth management, and what they believe is the level of wealth required to be a viable wealth management client.”

Remember that there is no definition of wealth management, and therefore no minimum wealth required to access wealth management services per se.

Perhaps the most telling data from the Spectrem study comes when investors were asked to agree or disagree with the sentence “wealth management is for people richer than I am”. Among all investors, 30 percent agreed, and there was an obvious delineation of investors based on their net worth. More than half of investors with a net worth below $1 million agreed with the statement, while less than 30 percent of those with a net worth over $1 million agreed. Twenty-eight percent of investors chose not to pick a side in the debate.

This information matters to advisors and providers because they must determine whether the description they use for their services causes investors to disregard them. If a firm professes to offer wealth management, does that immediately cause investors with a net worth below $1 million to look elsewhere for advice? And, is that what companies are trying to accomplish, weeding out the less wealthy from the get-go?

So, dear investor, what level of net worth is sufficient to access wealth management services?

The break is exactly at $1 million in net worth (not including primary residence). Fifty percent of investors say an investor must have at least $1 million to qualify for wealth management services. Nineteen percent believe the threshold is $2.5 million, and 13 percent believe it is at least $5 million. That is a definite and seemingly high level of affluence in order to use wealth management services.

Is wealth management appropriate for your clients? Seventeen percent of investors said no, including 25 percent of those with a net worth under $1 million. One-third of investors did not choose to pick a side.

 

Top Takeaways for Advisors

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This is a marketing debate, but it is one which advisors will be involved in when they are approaching new clients or trying to attract new clients. Investors have a distinct opinion about what the words “wealth management” and “financial planning” means, even if there is no certain definition. Advisors and providers must be aware that their words of description used to promote their services have an impact, whether that impact is appropriate or not.

 

 

©2018 Spectrem Group