Most affluent investors have advisor relationships, but there is a wide disparity in how those investors use their financial experts.
Spectrem’s Wealth Segmentation Series report Advisor Relationships and Changing Advice Requirements details how investors use their advisors, as well as what they think about the advice they get, especially when it comes to product recommendations.
The Spectrem research looks at three different wealth segments, and the highest wealth level is the Ultra High Net Worth investors, with a net worth between $5 million and $25 million (Not Including Primary Residence). Among UHNW investors, 19 percent do not use an advisor at all, and 23 percent of the youngest investors, those under the age of 50, do not use an advisor at all.
Twenty-nine percent of UHNW investors believe themselves to be self-directed investors, doing all of their investing by themselves without input from advisors.
Among the UHNW investors who do use advisors, 53 percent rely and trust their advisor for the vast majority of their financial needs. However, that is not true among the youngest UHNW investors, those under the age of 50; only 22 percent of those young investors claim to rely on their advisor to that great extent.
One-third of the UHNW investors rely on their advisor for certain types of investments, such as industry specific needs such as real estate, or when alternative investments are considered. Again, only 22 percent of the younger investors turn to their advisor for those needs.
More than one-quarter (28 percent) are relying less on their advisor and make more of their financial decisions themselves without an advisor assist. This is especially true of the younger investors, includes those under 50 (33 percent), those between the ages of 50-54 (35 percent) and those between the ages of 55 and 64 (32 percent).
Then there are those investors who test the advisor waters. Twenty-two percent of investors have apportion of their investment funds with an advisor to compare results with their own investing.
There is also a portion of the UHNW investors (21 percent) who are transitioning from doing their own investing to allowing advisors to do the work with more of their assets.
If there is a holdback preventing investors from using their advisors more fully it comes from a distrust of what advisors are up to with the investable funds.
Sixty-four percent of UHNW investors believe that financial advisors are biased toward a certain group or type of products, and 42 percent think advisors are more concerned with selling products than helping their clients. That includes more than half (52 percent) of the youngest investors under the age of 50.
More than two-thirds of UHNW investors (68 percent) want their advisor to have a diverse package of products available from a variety of different companies.
For more information on the UHNW, click here