How Investors Rate and Judge Their Advisors


 In any professional field in which there is competition for business, customers find a way to rate and judge the competitors for services rendered, knowledge of the products being offered and willingness to communicate with their clientele.

That exactly describes how affluent investors choose, rate and judge their financial advisors.

The industries that surround financial markets are extremely competitive in part because of the huge amounts of money involved.  Financial advisors and providers are in competition with each other to attract affluent and wealthy investors and make an effort through performance and advertising to differentiate themselves from others in the business.

Spectrem’s new wealth segmentation study Advisor Relationships and Changing Advice Requirements asked investors to explain how they rate and judge their advisors.

“The insights in the study can impact the way an advisory firm approaches and attends to clients,’’ said Spectrem President George H. Walper Jr. “An advisor’s investment performance in relation to the overall market is important, but there are so many other factors investors examine when they choose a new advisor or decide whether to stay with their current advisor.”

Investment performance is a factor for investors looking for or working with a financial advisor. Among Ultra High Net Worth investors with a net worth between $5 million and $25 million, 16 percent don’t use an advisor at all, and more than two-thirds of those don’t use an advisor because they believe they (the investor) can outperform an advisor in making investment choices.

Investors who believe they can outperform advisors would make for difficult relationships, unless advisors can show that they are willing to listen and can provide services and advice that goes beyond the task of selecting investments.

The advisor trait most desired by investors is the perception of honesty and trustworthiness. But a significant portion of the UHNW investors consider a strong referral from a trusted source is more important than the honesty factor. It should be clear to advisors to cultivate recommendations from investors who work in fields which include affluent investors in hopes of obtaining new clients as a result.

(“Investment track record of advisor” finished third among UHNW investors as the most important factor in choosing a new advisor.)

While there are investors who stick with one advisor and stay with that advisor for a long time, many investors change their advisor from time to time, and a majority of UHNW investors use more than one advisor. The study asked investors which advisor actions or inactions that would cause them to change financial advisors, and communication habits came out on top.

Seventy-one percent said they would change financial advisors if their current advisor did not return phone calls in a timely manner, and 57 percent said the same thing about lackluster e-mail responses. More than 50 said advisors who do not meet their expectations for proactive communication (calling when some factor in the markets could affect investment decisions).

None of those factors that would prompt an investor to change advisors has anything to do with actual investment performance. In fact, only 41 percent of UHNW investors said “under-performing compared to the overall stock market” would be a reason to change advisors.

Do advisors know that investors care more about communication than they do about bottom line numbers? 

The fact of the matter is that financial losses are not a deal-breaker when it comes to the investor-advisor relationship. Only 30 percent said they would leave an advisor for losses over the span of two years, and only 27 percent said they would leave an advisor for losses over a five-year span. Investors are more likely to leave an advisor because the advisor concentrates only on investments and does not consider the investor’s overall financial situation.

Certainly, investors are going to have a positive attitude toward their advisor if they are making money in their investments. More than one-third of UHNW investors pay no attention to their advisor fees when their investments are growing.

But investors consider so much more than the bottom line when choosing a new advisor or deciding the long-term benefit of their current advisor relationship.

Top Takeaways for Advisors

Do you want to know how your clients are going to rate you? Ask! Every investor is different, and while your communication habits may please one investor, another investor may not want to hear from you unless the numbers are unusually good or unusually bad. Find out what each investor wants from you and make certain you note it.


Don't be afraid to do a client satisfaction study.  Most advisors receive higher results than they anticipate.  Additionally, they learn important information regarding how to make their customers even happier.


*According to Spectrem research, there are currently 29.8 million households with $100,000 - $1 million in net worth (not including primary residence, NIPR).  There are 9.1 Millionaire households ($1 million - $5 million net worth, NIPR), 1.21 million Ultra High Net Worth households ($5 million - $25 million net worth, NIPR) and 145,000 households with more than $25 million in net worth, NIPR. 

©2016 Spectrem Group