Investors Preferred Financial Plans Include...


A majority of investors prefer that advisors develop a financial plan for them to help them understand their financial status today with an eye toward what tomorrow may bring.

However, the phrase “financial plan’’ is very generic. Investors have different requirements for a financial plan, based on their own investment and portfolio details.

Our wealth segmentation series report Advisor Relationships and Changing Advice Requirements asked investors what they have included in their financial plans. The answers differ based on age, career and advisor dependency, but one of the greatest differing factors is wealth level.

The study looked at investors in three different wealth segments – Massa Affluent (with a net worth between $100,000 and $ 1million, not including primary residence), Millionaire (with a net worth between $1 million and $5 million NIPR), and Ultra High Net Worth (with a net worth between $5 million and $25 million NIPR).

In general, the wealthier the investor, the more information is included in the financial plan.

“Investors determine what details they discuss with their financial providers and advisors, and what they want to consider in regards to their financial future when making a plan,’’ said Spectrem president George H. Walper Jr. “The greater the wealth level, the more specific matters require a detailed examination from the advisor.”

The greatest differences in financial planning details come in tax planning, charitable giving advice and estate succession guidelines. Among UHNW investors, 62 percent have tax planning advice in their financial plan, 52 percent have received guidelines on estate planning, and 28 percent have guidelines regarding charitable giving (which also relates to tax planning services).

Among Millionaires, only 48 percent receive tax planning advice in their written financial plan. Only 36 percent have their estate succession considerations included, and only 15 percent have discussed concerns over charitable giving in their financial plan.

Mass Affluent investors are even less concerned about those issues, at least as far as having them written in a financial a plan. Only 40 percent receive tax planning guidelines, only 24 percent have discussed estate succession plans, and only 11 percent discus charitable giving matters.

Among UHNW investors, 70 percent have their rate of return needed to reach financial goals included, as well as their present net worth calculation. Millionaires have similar percentages in those two categories, while only 65 percent have their present net worth calculated in their financial plan.

Obviously, with great wealth comes greater tax considerations, greater concerns over the proper manner of processing an estate plan, and more opportunity to make sizable charitable donations.

There are similarities in those who have spending and budget matters included in their financial plans. Among Mass Affluent investors, 37 percent have discussed when to withdraw funds form investments for spending and budget purposes, 40 percent of Millionaires have done so and 35 percent of UHNW investors have received that advice.

“That data certainly makes sense,’’ Walper said. “Financial advisors are best suited to advice investors at all wealth levels on future financial needs, with a knowledgeable eye toward what might be on the horizon for investments and spending needs.”

Certainly, wealth level is a determining factor in how much gets included in a financial plan. The data shows only slight variations related to age (with older investors wanting more information in their plan) and advisor-dependency. But data related to an investor’s occupation show wide variations in what types of information are required in the written financial plan.