Affluent investors regularly perform a balancing act, negotiating the need to know how best to maximize their investments with the concern over the cost of acquiring products and services.
Talking to a financial advisor about a retirement plan is time-consuming and costly. There will be a point in which investors need that information if they want to make the most of retirement from a financial standpoint, but do they need that information right now?
Does an investor’s portfolio require a deep dig into tax-advantage strategies? Is the investor ready to discuss alternative investments? Are there enough assets to discuss creation of an estate plan?
Investors and advisors discuss products and services every time they speak or get together. Investors alter their investment strategies and product purchases accordingly. Judgements are made over the success of one plan or another, and changes are made, to be judged again in the next meeting or conversation.
Yet, investors reportedly want services they are not receiving. Advisors can believe all they want that they are covering all the bases, but there are holes in the services provided to affluent investors all of the time.
Spectrem covers this topic from all angles in its annual study of investor-advisor involvement. Advisor Relationships and Changing Advice Requirements asks investors to select the services they receive from their advisor, the services they have received from someone other than their primary advisor, services they plan to seek in the future, and services they believe they do not need.
“The value of this research is vast,’’ said Spectrem president George H. Walper Jr. “It does not necessarily lie in the percentages of investors receiving services from their advisor. The value is in the services investors are getting from someone other than their provider, and in the services they plan to seek in the future. That answer begs the question ‘When are you going to seek that advice?’”
For example, among Ultra High Net Worth investors with a net worth between $5 million and $25 million, 26 percent plan to seek advice on long-term care planning sometime in the future. The same is true of Millionaire investors with a net worth between $1 million and $5 million.
The point of long-term care is to create a plan now so that the funds are available for down the line when the investor is in need of long-term care. There is no real moment when it is “too early’’ to consider long-term care plans.
In both the Ultra High and Millionaire cases, more investors plan to seek the advice than have already received it. Considering both wealth segments have an average age over 60, when exactly is the proper time to seek that advice?
A look at the chart accompanying this article shows the myriad products and services in which investors ”plan to seek” information in the future. Among Millionaires, 16 percent plan to seek advice on tax-advantaged strategies sometime in the future. There are tax implications with nearly every investment, especially when it comes time to cash them in. When is the proper time to consider those tax implications?
What’s wrong with right now?
The one area in which timing might play a more significant role is in retirement matters. While there is no “correct’’ time to start planning for retirement, most advisors will tell you the sooner the better in terms of retirement income.
Advisors must keep an eye on the services their clients are not receiving, because those investors may be missing out on opportunities, or may not even know it is time to consider those services.
Top Takeaways for Advisors
The chart attached to this article bring up two matters which should concern advisors: investors who are currently receiving particular advice from someone other than their primary advisor, and investors who don’t need certain types of advice. Are there really 35 percent of UHNW investors who don’t need a written financial plan, or 35 percent who don’t need to plan for retirement? There certainly can be an argument made that all investors need those services to maximize their financial position. Be prepared to make that point going forward.
It makes sense that 30 percent of UHNW investors get estate planning advice from someone other than their primary advisor. After all, family attorneys are often consulted on matters related to wealth transfer. But 14 percent of UHNW investors talk to someone other than primary advisor about selecting individual stocks and bonds? Seven percent are talking to someone else about diversifying assets away from a concentrated position? Is your investor cheating on you?
©2017 Spectrem Group