For most investors, their relationship with a financial advisor is a matter of degrees.
Investors decide, either consciously or unconsciously, how much of their assets to turn over to their financial advisors. For most investors, advisors play a role in the handling of approximately 50 percent of assets, while investors maintain complete control over the other 50 percent.
But the percentages vary depending on the wealth of the investor, as well as the occupation of the investor.
Our wealth segmentation series study Advisor Relationships and Changing Advice Requirements looks at how affluent investors divvy up their assets and share control of all of their assets.
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Among the wealthiest investors, the Ultra High Net Worth investor with a net worth between $5 million and $25 million, 47 percent of assets are completely controlled by the investor with no input from professionals. Thirty-five percent of UHNW assets are controlled by the investor with input from an advisor, and 18 percent of assets are handled by the advisor entirely.
There are similarities and differences as wealth decreases. For instance, among Millionaire investors with a net worth between $1 million and $5 million, only 16 percent of assets are handled entirely by an advisor. Forty-eight percent of assets are controlled entirely by the investor, and 36 percent are controlled by the investor with input from an advisor.
Mass Affluent investors, with a net worth between $100,000 and $1 million, are more likely to control their assets themselves for a variety of reasons. Fifty-nine percent of assets among Mass Affluent investors are controlled entirely by the investor, only 27 percent are handled with the advice of an advisor and only 15 percent are turned over completely to the decisions of the professional advisor.
“One of the most complicated decisions an investor makes is how much to use an advisor, and how much of their assets to turn over to an advisor completely,’’ said Spectrem president George H. Walper Jr. “Obviously, trust is a factor, but so is an investor’s desire to remain involved with the control of his or her assets, and the time it takes to stay on top of your portfolio yourself.”
The study segments the investors by age, wealth, advisor-dependency and occupation, and it is in the occupation segmentation that significant differences appear.
Among UHNW investors who are managers, only 13 percent of assets are handled completely by an advisor. Managers are far more likely to use advisors as consultants (with 40 percent of their assets), and more likely than most occupations to control a larger portion of their assets themselves (48 percent).
However, it is UHNW business owners who are more likely to control a larger portion of their assets alone. Among that segment, 54 percent of assets are completely controlled by the investor, and only 26 percent (well below the average) is handled in consultation with an advisor. Interestingly, business owners report 20 percent of their assets are handled completely by the advisor, which is slightly above the average among UHWN investors.
Among Millionaire investors, managers turn over more of their assets to an advisor than any other occupation, doubling the others in that category. Managers report 21 percent of their assets are handled completely by an advisor, while only 12 percent of professional assets (a professional being a doctor or lawyer), 10 percent of business owner assets and only 9 percent of senior corporate executive assets are handled completely by an advisor.