You would think it would be simple to keep an investor client: a wealthy client is a happy client, and increasing the size of their portfolio with regularity should do the trick.
But investors have other demands of their financial providers and advisors beyond just making them money.
Spectrem’s new Perspective Why Investors Switch Advisors looks at what types of investors are most likely to switch advisors, and more importantly, what aspects of the advisor-investor relationship is most likely to trigger a desire to change.
“Certainly, an investor wants an advisor who can increase the size of his portfolio with good advice and ideas,’’ said Spectrem president George H. Walper Jr. “But investors want to maintain a consistent line of communication with their advisor, and want to know they are being made aware of changes in the stock market or other business areas. If those needs are not met, investors will find someone who will meet them.”
Lifetime relationships between investors and advisors do happen, but a majority of the time, investors seek alternate advice. Only 42 percent of investors have never switched advisors. Among the oldest investors, those 69 years of age and older, 38 percent have never switched advisors.
It makes sense that an investor might switch advisors if the investments suggested by the advisor were not performing well related to how the stock market as a whole performs. But for many investors, there are far more personal reasons for switching advisors.
The study looks at more than a dozen reasons, including those related to fees, understanding risk tolerance, and returning phone calls or e-mails. Also included is a detailed look at the investors who switch advisors for a specific reason; for instance, those most likely to switch advisors due to under performance are usually older, wealthier, have significant assets in mutual funds and research investments in printed articles and on financial websites.
Overall, informed investors are more likely to switch advisors. Those that read financial articles or financial blogs are more likely to switch than those that do not, and the widest disparity is among those who visit major financial media websites such as CNBC and Fox Business.
“The most important findings of this report clearly indicate that investors that like to self-educate themselves and follow the markets are more likely to change advisors than those who like to just discuss issues with their advisors,’’ Walper said.