The majority of high net worth investors have stuck with their financial advisors despite heavy losses to their portfolio as a result of the financial crisis that have left them “highly distrustful and disillusioned."
 
“There is a lot of irony from the survey. Investors are disillusioned but they optimistic,” said Jim Neuwirth, the managing director of Northstar Research Partners. “Investors have been burned by the market, some have even been burned by their advisors, they have lost money, but they are sticking with their advisors.”
 
According to the Northstar/Sullivan Rebuilding Investor Trust Survey, released Wednesday, wealthy investors plan to follow the advice of their advisor, but don’t plan to work with other financial advisors in the future. This is in contrast to a report released this week by Aite Group that found that financial advisors lose a majority of their customers to online brokers.
 
Eight-nine percent of wealthy individuals surveyed who had an advisor when the market downturn began are still working with that same advisor, and 20% said that they are relying on their advisor even more than before.
 
Additionally, 61% said that they have a high level of trust in their primary financial advisor. Only 27% of respondents say trust in their advisor has declined since before September 2008, but just 10% of the 1,539 high-net-worth investors surveyed said that they highly trust financial advisors or financial institutions in general.
 
“We are dealing with a highly cynical investor base that still loves their financial advisor,” Neuwirth said. “I think it is a lot like people that say, ‘I hate the healthcare system, but I love my doctor.’”
 
According to Northstar’s research, bank-based advisors scored the lowest with wealthy individuals, as 78% of respondents said that they planned to stick with their bank advisor. By comparison, 89% of wealthy individuals that use a financial planner at a national or regional firm and 82% that work with a full-service brokerage firm plan to remain with those advisors.
 
Neuwirth said wealthy individuals are sticking with their advisor because they are unsure something better is out there and because they have developed strong personal relationships with their advisor.
 
In the wake of the financial crisis, Neuwirth said wealthy investors are more engaged in financial news and are focused on “finding ways to move forward effectively.” Seventh-nine percent of wealthy investors blame “big Wall Street firms” for the market meltdown. The vast majority of respondents favor greater oversight of financial institutions, as well as additional oversight of financial advisors.
 
Banks, wirehouses, wealth managers and financial advisors will need to work hard to regain the trust of wealth investors, Neuwirth said.
 
“Going forward, in this environment, the cost of new customer acquisition is likely to be higher; what this study clearly shows is that the best opportunities for financial services companies are in cultivating their existing client base,” he said.
 
Founded in 1998, Northstar Research Partners is a market research consultancy with offices in Toronto, London, New York, Los Angeles, Boston and Detroit.