Which Investors are Dependent on Their Advisors?



There is no shame in admitting that we all are dependent on others at different times in our daily lives. We are dependent on auto mechanics to know how to take care of our cars, dependent on the IT personnel to keep our computers operating, and dependent on airline pilots to get us safely from one place to another.

However, when it comes to affluent investors, their level of dependence upon a financial advisor varies in a dozen different ways, ranging from the age of the investor to his or her wealth level or occupation.

Advisor usage is high among affluent investors, and higher among those investors with greater wealth. It ranges from 68 percent among mass Affluent investors with a net worth between $100,000 and $1 million, to 82 percent among Ultra High Net Worth investors with a net worth between $5 million and $25 million. 

But there are investors who consult advisors only occasionally, or only contact advisors under special or new conditions in their lives. Then there are investors who look to their financial advisor to be the overseer of almost everything related to their investment present and future.   

To gain deeper insights into how investors work with their advisors, Spectrem separates behaviors into four groups, from those who are relatively advisor-free (Self-Directed) to those who admit to being almost entirely dependent upon a financial advisor (Advisor-Dependent).

“There are segments of the investor population which tend to be more advisor-dependent, and advisors should be aware of those tendencies when meeting or recruiting new clients,’’ said Spectrem president George H. Walper Jr. “Such reliance can place different pressures and expectations on the investor-advisor relationship.” 

Even within those investors who consider themselves to be Advisor-Dependent, there are degrees to which they allow advisors to control their financial futures.

By definition, an Advisor-Dependent investor is one who relies on an investment professional or advisor to make most or all investment decisions.

From the standpoint of wealth level, there is only a minor difference in how many investors consider themselves advisor dependent. Among Mass Affluent investors, 11 percent consider themselves advisor dependent. Among Millionaires (with a net worth between $1 million and $5 million) and Ultra High Net Worth investors, 14 percent self-report as advisor dependent.

Similar percentages are reported among Millionaires, with only 37 percent under the age of 36 allowing their advisor to handle the vast majority of their financial needs to 60 percent of those over the age of 64.

There is a wide difference in advisor dependency based on occupation. While 64 percent of managers trust their advisor with the vast majority of their financial needs, only 41 percent of Millionaire Business Owners report the same level of advisor usage, and only 46 percent of Millionaire Senior Corporate Executives do so.

Advisors also need to understand that many investors who consider themselves advisor dependent still want to have some involvement in the decision-making process. For example, 30 percent of Millionaire investors who consider themselves advisor dependent make some decisions themselves without the aid of an investor.