A majority of ultra-high-net-worth individuals and families do not want their advisors making all of their financial decisions—and the higher the level of wealth, the more decision-making power the family wants to retain, according to a new study by the Institute for Private Investors.
IPI members have at least $30 million in assets and 40 percent have $200 million or more. For those with up to $50 million, only 32 percent say they are comfortable giving their advisors full discretion to make portfolio changes. For families with $200 million in assets, that percentage slips to 20 percent, according to IPI, a subsidiary of Campden Wealth.
“[Since] the financial crisis, investors have realized they cannot abdicate the ultimate responsibility for overseeing their wealth,” Mindy Rosenthal, IPI executive director, says. “We are seeing a clear trend toward investors taking an active role in partnership with the advisor.”
The IPI study included 75 families and 14 advisors. IPI is an educational and networking organization for ultra-high-net-worth investors and their advisors.
In other findings, 36 percent of families that rely on an in-house chief investment officer turn over the reins to the portfolio entirely. An in-house CIO is usually someone known well to the family or a family member. By contrast, only 10 percent of those who outsource the CIO function give that person full discretion. The remaining 90 percent retain input on the decision-making process.
Just 38 percent of the advisors who responded expressed confidence that their own firms’ business models contained less conflict of interest and more reasonable and transparent fees than they did five years ago.
Just 28 percent of families say they are confident their current investment strategy can handle future risks such as geopolitical crises or domestic policy shifts. Nearly half are neutral and 23 percent expressed major concern.
Despite concerns about an uncertain future, most of those surveyed do not feel pressure to change their spending habits. Only 28 percent agree the low return environment has created significant pressure on their spending or on the way they look a their wealth management.