Affluent investors often use more than one financial advisor, although they usually can state their primary advisor.
For many investors, there is an understanding and evaluation of the many companies that offer financial services. We asked investors to let us know how they perceive all of those companies on a variety of areas related to the services they offer.
In our study Asset Allocations, Portfolios and Primary Providers, we asked investors to identify the investment firms they believe are superior in a number of areas. Investors were allowed to select as many companies as they wanted to. According to that study, Vanguard, Fidelity and Charles Schwab scored high marks across most categories.
In our earlier Spectrem study Advisor Relationships and Changing Advice Requirements, investors were asked to identify the one bank, provider and advisor firm they work with primarily. As we discover often in our daily lives, perception does not always equal reality.
“Our specific question provides a value, indicating which firms investors work with, and the differences between investors from one wealth segment to another,’’ said Spectrem president George H. Walper Jr. “The more widespread question provides in an indication which companies are perceived strongly and can give an indication to some firms the areas in which they need to improve.”
An examination specific to Ultra High Net Worth investors with a net worth between $5 million and $25 million tells the story. Asked to name the company with the most talented advisors and staff (and being allowed to pick all that apply), UHNW investors listed Vanguard first, Fidelity second, and JP Morgan Chase third. However, when asked to name the providers they actually work with, Fidelity was selected by 15 percent of investors, Charles Schwab by 14 percent and Vanguard by 11 percent. Schwab was not among the top five companies named from the first question.
Vanguard, notably, was listed first by UHNW investors in almost every category of specific skill and service, including most expertise in handling money, most innovative products and services, most trustworthy and transparent, and most likely to increase usage of. However, Vanguard finished third among specific providers, and fifth among the company with the best advisors. This sort of dichotomy between the perception of Vanguard and the actual use of Vanguard is seen in all three wealth segments, especially in terms of the advisors used.
For the specific question, investors were given definitions of primary provider and primary advisor, and then was asked to name the company with whom they worked. While Fidelity took the top spot for provider and advisor firm in all three wealth segments, Edward Jones was the No. 1 advisor firm among Mass Affluent investors with a net worth between $100,000 and $1 million, and Merrill Lynch was the top advisor firm among UHNW investors. Millionaires, with a net worth between $1 million and $5 million, chose Fidelity No. 1.
In terms of perceptions, Vanguard, Fidelity and Charles Schwab were the three firms that were at or near the top of the list in all categories of service and skill in all wealth segments. The one question that produced unique responses was “the firm most likely to increase usage of”, in which BMO Harris was ranked third among Mass Affluent investors, and Wells Fargo was ranked third among Millionaires.