Big concerns are advisor integrity and accounting scandals.
For many top financial advisors, job one is knowing what their affluent clients are thinking-and fretting-about. Without touchpoints, as our research has demonstrated again and again, the client/advisor relationship can wither.
To get an update on the mindset of the wealthy, we recently conducted a survey of affluent investors. We found out how they felt about such issues as the still-declining stock market, the murk of corporate accounting scandals, the continuing threat of terrorism and the prospect of war with Iraq. We also wanted to see how those investors were feeling about their financial advisors.
We found that, despite the understandable disappointment of yet another down year for the stock market, the respondents' short-term outlook was fairly bright and their long-term take was, across all of the issues, even more optimistic. One concern was troubling, however-doubt about the integrity of financial advisors.
Who We Contacted
During the fourth quarter of this year, we surveyed 123 high-net-worth investors. More than two-thirds of the respondents, 78.3%, had from $1 million to $2 million in investable assets, while 15.0% had more than $2 million and the remaining 6.7% had from $500,000 to $1 million. They were mostly older investors, with nearly half (49.6%) over 66. Another 36.6% were 56 to 65 and 13.8% were 46 to 55. The vast majority of the respondents, 81.3%, were male, and most of them had either two (48.7%) or three (42.3%) financial advisors.
We asked them how their investments had been impacted by the state of the stock market, the economy and the world (Exhibit 1). We also wanted to know where they thought the stock market would go in 2003 (Exhibit 2). Finally, we asked them which scenarios they were most optimistic about, both in 2003 and three-to-five years down the road (Exhibit 3).
What They Told Us
The top two issues that affluent investors were "very concerned" about-and the only ones that were mentioned by more than half of the respondents-stemmed from this year's wave of corporate accounting scandals and the continuing news of questionable activities by analysts and advisors.
It's safe to say, however, that allegations alone are not responsible for two-thirds of the respondents questioning the integrity of financial advisors.
Part of the issue stems from their dotcom hangover and the general recasting of the relationship between investors and financial advisors toward a more consultative model. That is, some investors are probably still smarting about the "hot" tech stocks that their advisors promoted back in 1999 and 2000, feeling that those advisors may have put a sale above the relationship. Not coincidentally, as our other recent studies have shown, those advisors who have broader relationships and who have been most proactive in contacting their clients are the ones who suffered least during the downturn when measured by assets under management and referrals.