There are some investor-advisor relationships that last a lifetime.
But a majority of wealthy investors change their advisor at least once, and there are clear factors influencing the decision to change advisors. Those factors are different depending on the wealth, age, gender and occupation of the investor, but they are legitimate concerns for every advisor to consider when engaging with investors, whether they be current clients or prospective ones.
“Financial providers and advisors spend more time with their current clients than they do trying to get new clients,’’ said Spectrem President George H. Walper Jr. “It behooves them to know what segment of clients are likely to change advisors, and what behaviors tend to trigger advisor switches.”
So let’s start at the beginning, by identifying some of the traits of an investor likely to switch advisors.
Among wealthy investors, 58 percent have switched advisors. More than one-third switched their advisors more than five years ago, although 11 percent switched advisors in the last two years.
An indication of the inevitability of investors having more than one primary advisor in their lifetime is the investors over the age of 68, known in the Perspective as the World War II investors. Of that group, 62 percent have switched advisors over their lifetime, meaning 38 percent have maintained the same advisor from the beginning of their relationship.
It is not necessarily true that only young investors switch advisors. Of those World War II investors, 10 percent have switched advisors in the last two years.
Wealthy investors are more likely to have switched advisors. Among Mass Affluent investors (with a net worth between $100,000 and $1 million), 49 percent have never switched advisors. Among Millionaire investors (with a net worth between $1 million and $5 million), 40 percent have never switched advisors. Of the Ultra High Net Worth investors (with a net worth between $5 million and $25 million), only 38 percent have stayed with the same advisor through their investing lifetime.
There is also a clear connection between the dependence an investor has on an advisor and the likelihood they will change advisors at some point. Of the investors who have switched advisors, only 18 percent consider themselves advisor-dependent, meaning they look to their advisor to make all or most of their advisor decisions.
Younger investors were more likely to cite a lack of proactive communication in making an advisor switch, while the wealthiest investors were more likely to complain about an advisor not providing good ideas or advice. Only 22 percent of all investors said they would change advisors due to their advice underperforming compared to the overall stock market, although the youngest and oldest investors were more likely to cite that as a possible reason.