Financial advisors do client satisfaction surveys to determine how well they are responding to the needs of the customers. One popular question advisors ask is “What additional services can we provide?”
The question they don’t ask is “What services do you not need from us?”
In its most recent research, Spectrem did ask the question.
Spectrem’s quarterly wealth segmentation series study specifically examined the relationship between advisors and investors. In Advisor Relationships and Changing Advice Requirements, the study listed 11 forms of advice that investors can be looking for from their advisor. But the affluent investors surveyed for the study were given the opportunity to select “I don’t need this type of advice.”
The result? Investors are still not overwhelming advisors with retirement advice or questions about the long-distance future.
“No two investors are alike; the information one investor wants, another investor finds unnecessary,’’ said Spectrem president George H. Walper Jr. “This research does not eliminate any topic as uninteresting to all investors, but it does clarify those areas advisors might want to concentrate on as well as those areas advisors can move to the back burner.”
The Spectrem research studied affluent investors in three different wealth segments, including the highest, the Ultra High Net Worth investor, with a net worth between $5 million and $25 million.
These UHNW investors were asked to place their advice needs into one of three categories: “I currently receive this advice”, “I plan to see this advice in the future” and “I don’t need this type of advice.”
Among three categories, less than half of UHNW investors already receive advice, and well over 40 percent claim not to need the advice.
For instance, 49 percent of investors claim they do not need advice related to their insurance coverage. The topic was “conducting insurance audit to determine adequate or affordable coverage”. Forty-four percent of investors already get this service and 8 percent have plans to seek this advice in the future. The older the UHNW investor, the less interest they have in an audit of insurance coverages.
For those investors who claim they do not need advice related to insurance coverage, advisors would benefit from knowing why their client investor does not need to discuss that important aspect of financial concern. Do they have one insurance agent who covers all of their needs? Is their insurance coverage updated regularly?
More than 40 percent of investors claim they do not want information on long-term care insurance, and that can be for any number of reasons. Some investors perhaps have investigated long-term care insurance and found it too expensive, while others may believe they have their long-term care financial needs covered with other properties. Still others actually believe they won’t live long enough to need long-term care.
Of particular interest to advisors is that 50 percent of investors say they do not need advice related to alternative investments. This is unusually high for investors with a net worth as high as $25 million. Alternatives are a good way to diversify a portfolio, and often have higher yields while including higher risks. To have 50 percent of clients wave off such a broad spectrum of potential investment opportunities might require some investigation by the advisor.
Alternatives, after all, take many different forms. Hedge funds, for example, are very popular investment products and advisors can discuss the possibilities with hesitant investors to determine whether they know all of the possibilities that exist.
The Spectrem research shows that younger investors are more likely to want to discuss alternatives at some point in the future. Older investors are more likely to be set in their investing ways.
On the other hand, the wealthier the investor, the more likely that investor is to want advice on alternatives.
Two of the choices in the Spectrem study received a similar percentage of investors who have no interest in advice related to that topic. Both “planning for retirement” and “establishing retirement income streams” were pushed aside by 34 percent of investors (while 57 percent of investors said they already receive that form of advice from advisors).
The question to investors who might say they don’t need retirement advice would be “why not?” For the investor’s sake, advisors should determine what investors are doing in regards to their retirement if they do not seek advice on the subject from a financial advisor.
Top Takeaways for Advisors
Nothing can be more irritating to an affluent investor than to have an advisor ask questions about an investment issue in which the investor has no interest. However, advisors should offer at least one question related to all investment topics to make sure the investor is covered. A good advisor can ask the question without seeming nosy or intrusive.
Some investors do not know what they don’t know. While an investor might say they do not concern themselves with “retirement income streams”, an advisor can list a couple of possible sources and quickly state the advantages of having multiple income streams for retirement, when it is difficult to increase income.
©2016 Spectrem Group