HNW investors question advisors’ motives

The High Net-Worth Investors Survey, Spring 2010 was conducted online and it included 500 investors, each with a minimum of $500,000 in investable assets.

The findings of the survey reveal opinions of three investor segments: those who use a financial advisor, those who make their own decisions, and those who do both.

“Most still see a role of advisors in helping investors, particularly in getting through difficult markets,” says the study. “Understanding and managing risk is the most important thing they look for.”

A section of participants, the study notes, sees less value in the fees advisors charge for transactions or advice.

The value of advice was most recognized among those over the age of 55 (60%), however it dropped to 11% among those between 35 and 44 years of age. In this younger age group, 74% use online trading accounts in addition to engaging the services of a financial planner.

The non-advised lot — 25% of those under 35 years of age and 19% of those over 65 — had a rather fractured opinion of professional advice. “Of non-advised, less than half are at least somewhat likely to seek the services of an advisor this year.”

However, 44% of those not using the services of an advisor say they don’t trust the profession and are not likely to seek advice. They said they were confident in their ability to invest sensibly and feel professional advice lacks value for money.

Only one in five say they can’t afford to engage a financial advisor.

Of those who are using an advisor or a broker, the vast majority are satisfied. On a scale of one to nine, 78% expressed a very high level of satisfaction with professional advice, while 19% were moderately satisfied and only 3% said they were not satisfied.

It’s not all rosy for advisors, though. “Investors are wary of advisors and see a tendency to sensationalize certain financial issues and trends,” according to 68% of respondents. A further 63% said “financial advisors or brokers have a conflict of interest, depending on who they work for.”

There is a key segment that sees less value in what advisors offer. “I am confident I can manage my investment by myself” was the prevailing sentiment among 48% of respondents. Thirty-eight percent said advisors “provide no better information or advice than can be found on the internet for free,” and that it’s not worth paying fees or transaction costs. A further 34% complained that advisors are too focused on the short term.

The survey participants said they were relatively confident about making financial decisions about their retirement, but lacked confidence in picking between stocks and funds.

The vast majority of these investors agree this is a time of great opportunity in the markets, but are unsure where to place their money.

(05/26/10)