The Financial Life Of Senior Executives

Part 3: Their advisors and how they find them.

This is the last of three articles based on our survey of 388 senior executives with at least $500,000 in investable assets. We have examined their key financial concerns, the financial products and services they use and are interested in and, in this installment, how they found their primary financial advisors.

Who do America's top executives favor as their primary financial advisor and how did they find that advisor?

Based on our research, the majority of senior executives use a broker as their primary investment advisor, with a bank or trust office the runner-up and independent financial advisors coming in a close third. When it came to the manner in which they found that advisor, co-workers were the best bet, closely followed by accountants and attorneys. Referrals by a friend, long a staple of the advisory world, barely made the cut, finishing behind such long-shot sources as seminars and published articles.

All of those surveyed have a position of vice president or higher at publicly traded, Fortune 1000 companies. They are all 45 or older, 81.2% are men, and they have been at their job for at least ten years. Each of them has at least one financial advisor (usually more than one). About half of the group, 49.2%, have $500,000 to $1 million in investable assets, 32.5% have from $1 million to $5 million, and the other 18.3% have over $5 million. The more assets they have, the higher the percentage they have in company stock, with the least affluent having 31.4% compared to 62.2% for the most affluent.

Key Concerns, Products And Services

In our first article, we found that the majority of the executives were, understandably, most concerned about their main holding-company stock-going down. They all wanted to diversify, but that could be problematic if the stock was in the form of options, restricted, or highly appreciated. Other issues of concern included losing their jobs, being sued and paying for their children's education.

Last month, we found that the wealthier the senior executives were, the more interested they were in products and services designed for the affluent such as hedge funds, managed accounts and private money managers. As they became wealthier, they were also less interested in the more common investment options such as mutual funds.

This time, as noted, we are focusing on who they use as their primary financial advisor and how they found that advisor.

Brokers Lead The Way

As you can see from Exhibit 1, brokers were most often the primary investment advisor regardless of how much money the senior executives had. This is partly a result of the numbers-there are more brokers out there than any of the other professionals. It is also because the executives perceived their financial profile and needs as highly complicated, their company stock holdings being a prime example, and thought that they were better off working with someone connected to a large financial services firms who could easily access other professionals and products. Lastly, the large financial services firms have name recognition, and they have been aggressive in marketing to and pursuing high-net-worth clients.

Until a few years ago banks, second on the list, were the key players because of the high level of personal attention they offered the wealthy and the fact that they could access a broader array of products and services compared to most brokers, who concentrated on stocks and bonds. More recently, of course, brokers have been broadening their job description to embrace wealth management, thus elbowing banks from the top of the charts.