Financial advisors who have ultra wealthy investors as clients should make sure they are carefully following global events that have an impact on client portfolios, and should be ready to discuss them. They should also make every effort to bring those clients into all investment decisions and be ready to explain clearly all aspects of clients’ portfolios.
That’s the word from Spectrem Group, a consultancy specializing in retirement and the affluent, which just released the results of a survey of 1,146 wealthy investors inquiring about their investment attitudes and where they turned for advice.
The study looked at who millionaire investors—those with investable assets of over $1 million (not including residence)— turn to in making investment decisions. Some 41% of those surveyed said they relied primarily on their own research and analysis, while another 40% said they relied primarily on a trusted financial advisor. This compared to investors with less than $100,000 in assets, only 34% of whom reported doing their own research, and only 31% of whom said they relied primarily on a financial advisor for investment advice. Where 13% of these smaller investors said they got their advice primarily from family and friends, only 1% of millionaire investors said they relied on such sources.
Spectrem Group also found that millionaires are increasingly focused on international investments, as well as on global issues and how they affect their entire portfolio, with two-thirds in this group reporting they are “likely” or “more likely” to invest internationally. This compares to just 40% of investors with less than $100,000 who plan to invest globally.
“Wealthy Investors want to at least feel that they are involved in decisions,” said Tom Wynn, director of affluent research at Spectrem Group. “So even if you’re actually making the decision about their portfolios, make them a part of it and explain why you are doing something.” Wynn said, “‘Trust me’ is gone. Transparency and participation are in. All the scandals by fund managers is part of it, but also a lot of wealthy investors were burned by the financial crisis and feel that even if their advisors didn’t do a bad job, they could have done better.”
As for the focus on globalization, Wynn said, “More and more, wealthy investors are concerned about what’s going on internationally and how that affects their investments.” Advisors, he said, need to be conversant with everything going on internationally that could pose a threat or offer an opportunity.
“Advisors have a tendency to think all that matters is what’s happening in the U.S.,” he said, “but that isn’t going to work with wealthy investors anymore.”
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