Financial Advisor Usage


There are investors spanning the wealth spectrum who identify themselves as self-directed, meaning they make all of their financial decisions without consulting a financial advisor. What are the scenarios that would compel these investors to re-evaluate their independent mindset?

A majority of investors do use a financial advisor in some capacity, even if just for a specific purpose such as asset allocation or retirement planning or as a sounding board before making decisions regarding their portfolios. Roughly four-in-ten non-Millionaire investors with a net worth of at least $100,000 (not including primary residence) are self-directed, according to 2014 Spectrem Group wealth level. As wealth increases, so does financial advisor engagement. Thirty percent of Millionaires with a net worth of up to $4.9 million, 29 percent of ultra high net worth investors with a net worth between $5 million and $24.9 million, and 25 percent of investors with a net worth of at least $25 million identify themselves as self-directed.

A new Spectrem report on self-directed investors finds that the primary reasons they do not consult a financial advisor are either cost considerations or they think they can do a better job. But there are circumstances that would compel these investors to reach out to a professional.

Nearly three-fourths (72 percent) of affluent investors surveyed who think financial advisors are too expensive would contact a financial advisor if they came in to a windfall of money. Almost one-half (45 percent) would do so if their situation allowed to them get professional financial help at what they feel is a fair price. They would also be more likely to consult a financial advisor than those who feel they could do a better job than a licensed professional in a specific financial situation, such as creating a financial plan (24 percent vs. 12 percent). Likewise, they would be more willing to take the plunge and consult an advisor should that advisor come with a very favorable recommendation from a friend or family member (19 percent vs. 12 percent).

Among those who feel they could do a better job managing their own portfolio, receiving a financial windfall is also the most cited reason to get over their aversion to using a financial advisor. The one instance that would compel them to seek the consult of a financial advisor more than their more frugal counterparts is a situation where they were tired of managing their investments (29 percent vs. 8 percent).


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