Why Wealthy Investors Don't Want You



There are wealthy investors who choose not to use a financial advisor.

Go figure.

Sometimes there is just no convincing a wealthy investor that he or she would be more wealthy and better suited for the future by using a financial advisor whose job it is to consider the needs of investors and whose success is determined by their ability to do that job.

Spectrem’s study Advisor Relationships and Changing Advice Requirements examines the attitudes of wealthy investors towards their advisor relationships, and also considers those investors who do not have an advisor relationship.

“While it is revealing to see how investors feel about their advisor, it is equally revealing to determine why some investors eschew the chance to work with a professional who can assist them in investment and financial decisions,’’ said Spectrem president George H. Walper Jr. “Advisors and providers can determine if there is something they are doing that dissuades investors and then do something about it.”

Among Ultra High Net Worth investors with a net worth between $5 million and $25 million, 20 percent do not use a financial advisor. So one-fifth of that lucrative market is ignoring the opportunity to work with a financial professional.

They have their reasons, even though the most popular reason is arguable.

Sixty-two percent of UHNW investors who do not use a financial advisor believe they can do a better job investing their investable assets than a professional advisor can. Integrated into that response is the belief that the investor can also save themselves a great deal of money by not paying the fees or commissions that come with working with a financial advisor.

Can advisors challenge this assumption by investors who think they can outperform a pro? That would be difficult to do on a case-by-case basis. But a presentation of investing success can be used to indicate that a professional advisor can bring positive results, allowing the wise investor to compare his results to that of the professional to see if, in fact, his own approach is as successful as it needs to be.

It is especially revealing that 75 percent of investors in the Millennial and Gen X generations who do not use advisors believe they are capable of doing the job themselves. Will that opinion change over time, or when investment strategies get more complicated? Advisors need to be prepared for that possibility and present themselves as an alternative when the opportunity exists.

Another perception among UHNW investors who do not use a financial advisor is that the advisor is not likely to be looking out for the best interests of the investor. Forty-seven percent of those investors who do not use an advisor believe advisors are more interested in earning money for themselves than for the investor, and that is another perception that is going to be difficult to change.

The Spectrem study asked the question advisors would ask if they had the chance: What might cause you to consider using an advisor?

Twenty-five percent of UHNW investors who do not use an advisor admitted that there could come a time when they tire of the exercise of managing their own investments and will turn to a professional to do the work. This is a situation that comes up as investors get older, so marketing to affluent investors in the Baby Boomer generation or older Gen X investors could provide new clients with portfolios they created on their own.

Fifteen percent of UHNW investors who do not use an advisor admitted that a large windfall of money would change their mind about the wisdom of not using a financial advisor. Likewise, 15 percent said if someone could prove to them the performance of a financial advisor was worth the cost, they would change their mind.

Still, only 8 percent of those investors who do not use an advisor said it was “likely’’ they would change their mind in the future. Seventy-five percent said it was not going to happen.


Top Takeaways for Advisors

Is it worth it to battle for accounts with investors who are against the idea of employing a financial advisor? The answer is “Yes’’ because investors do change their mind, and you never know when that change of heart will occur.

The Spectrem study shows that 82 percent of UHNW investors express overall satisfaction with their advisor. That’s a significant percentage, and that research can be used to explain to reluctant investors that they are likely to enjoy their decision to use a financial advisor. 


©2018 Spectrem Group