A majority of wealthy investors switch their advisors at some point in their lives, and often they do so for reasons that don’t involve the bottom line. But there are those investors who only concern themselves with how the advisor is performing in the overriding task of making money and improving the investor’s portfolio.
According to Spectrem’s perspective Why Investors Switch Advisors, 22 percent of investors who have switched advisors did so because the advisor was under-performing compared to the overall stock market. It was the third most-selected reason for switching and the first that involved the process of increasing an investor’s net worth.
There are unique characteristics about investors who switch advisors due to poor investment performance, and those investors come from different segments such as age, wealth and investment knowledge. For instance, the oldest investors, those over the age of 68, are most likely to be looking at investment performance when making the decision to switch (and 72 percent of that age group did switch advisors at some point in their lives).
Investors with a fair knowledge of investing are also most likely to switch advisors who are not doing well with their selected investments as compared to the overall stock market. These knowledgeable investors are more likely to be the ones that are keeping aware of circumstances and events in investing, and are more likely to be the ones who get their information from reading financial articles.
Investors switching advisors due to poor investment performance are also the ones who are most likely to buy and sell stocks themselves using online services.
The bottom line about the bottom line is that these investors who switch advisors due to poor investment performance are more involved in the investment world. They are more likely to have significant assets in mutual funds and in their retirement plans, and simply pay more attention to what is happening with their portfolio than other investors.
“All financial advisors track their client’s investments, but some investors pay close attention as well,’’ said Spectrem President George H. Walper Jr. “Those investors who are involved, have been investing for a long period of time and know what they are talking about are going to expect their advisor to be increasing their net worth and improving their investment portfolio. If the advisors are not doing that, these investors will find someone who will.”
While there is a push among investors, especially young investors, to see their advisor increase their social media presence, that is not a significant concern for investors who care most about bottom line performance. They do not use social media to communicate with others, and they are less likely to use financial products and services because they are advertised in social media.
These investors do use social media, however, to gather financial information. They are going to be watching their investments any way they can, and they are going to be watching the financial professional they hired to watch their investments as well.