Blog: Who Do They Think They Are?!


There is one question we ask in our research with investors every month that surprises me when I see the results.

Every month, we initially ask investors with a net worth between $100,000 and $25 million if they have a primary financial advisor. In our most recent study Communicating with Advisors and Providers,  53 percent of investors said they had a financial advisor,  which means 47 percent said no. That’s a large number of investors who operate without a financial advisor.

That part is understandable. Entering into a business relationship with a financial advisor is not a decision made easily or without due consideration. Many investors believe they do not have the assets to warrant hiring a financial advisor, and 18 percent of the investors surveyed for Communicating with Advisors and Providers said so.

We segment all of our research, and investors with greater wealth are more likely to have a financial advisor, which also makes sense.

But there is one response that always makes me wonder what respondents are thinking.

We ask, “what are your reasons for not having a financial advisor?" and investors can provide more than one answer. In our most recent study, a major percentage (36 percent) of investors select the response “I can do a better job of investing than a professional.”

They don’t really think that, do they? I suppose they do, but I do not understand why.

Advisors succeed because their clients succeed. An advisor who does not provide investment advice that benefits clients is not going to have clients for long.

Advisors are trained professionals, with an understanding of the markets and the products and the services which investors can invest in. There is obviously some knowledgeable guessing that goes on in regard to the stock market, but informed decision-making is better than uninformed decision-making, and informed decision-making about investing money is what financial advisors are trained to do.

The idea that an investor with no training in investing can do a better job of profiting from investing is the definition of hubris. And, if I can state something that might be considered sexist, it is not surprising that our research shows men are more likely than women to respond that they can do a better job of investing than a professional.

But let’s move past the idea that the response is silly, and consider what can be done to change that response.

It is possible some investors simply do not know or understand what it is a financial advisor does that can be beneficial. Financial advisors and providers may need to revisit their marketing materials to provide detailed explanations of just how their expertise can provide better returns because they know what they are doing.

Of course, some investors are not going to be convinced, and there is nothing to be done about them. But there are many investors who apparently believe they can outperform a professional who can be convinced otherwise, with the proper explanation of the services advisors provide.

The other popular response (also 36 percent) we get when we ask why investors do not have a financial advisor is “I don’t believe a financial advisor would be looking out for my best interests”, and the Securities and Exchange Commission and the Department of Labor are still trying to come up with a fiduciary rule to eliminate that concern. But that may take just as long as it takes to convince investors they do not know as much about investing as professionals do.

As much as I don’t understand the point of view that an amateur investor can out-perform a professional, the fact so many investors feel that way means there is work to be done to prove they are incorrect in their thinking.

It’s not enough to simply shake your head and think “no, you can’t”.


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