Investors say they want clearer explanations about strategies, losses; close to half do their own planning, survey shows
Investors battered by the 2008 bear market and skittish about their investments would like their financial advisers to take more time explaining things to them, according to a soon-to-be-released State Street survey, which was provided on an exclusive basis.
“There has never been a bigger premium on the value investors place on advice,” said Anthony Rochte, senior managing director at State Street Global Advisors.
“Investors are trying to become more educated and their awareness of the adviser's role has gone up dramatically,” he said. “Investors are asking more questions.”
The online survey, to be released Monday by State Street and The Wharton School of the University of Pennsylvania, delved into investors' and financial advisers' perceptions — and misperceptions — of each other.
What they found isn't necessarily bad news for advisers, Mr. Rochte said.
Investors “are not moving away from advisers; they are getting closer,” he said, as long as advisers are able to “articulate their value.”
Just 51% of the 776 investors surveyed said that they work with an adviser, with the remainder saying that they manage money on their own. For those who go it alone, about half said they don't think that advisers are worth the money that they charge, while about one in five said that they enjoy managing their own money.
Investible assets held by the investors range from less than $100,000 (20%), to $100,000 to $499,999 (32%), $500,000 to $1.99 million (33%), $2 million to $9.99 million (12%) and $10 million or more (3%).
Investors and advisers had something of mismatch when asked about their biggest challenges in working together.
Forty-three percent of investors said that understanding why their adviser recommends certain investments is the single most challenging factor in working together. Another 20% said that their biggest challenge is getting their adviser to explain clearly why they lost money and what is being done about it. Getting their adviser to listen to what's important to them was cited as the biggest challenge by 14%.
About half the 2,196 advisers surveyed said that their biggest challenge is getting clients to stick to their asset allocation plan despite the market's volatility. Just 19% said that their biggest challenge is making the time to educate clients about investing.
“The economic crisis clearly has bred confusion and skepticism among investors. They continue to struggle with volatility,” the survey report said. Investors indicated a desire to be listened to, and “many advisers are not communicating well enough with their clients.”
Just 16% of the investors surveyed said that they use two or three advisers, and just over 1% said that they use four or more advisers, with 9% saying that number has increased over the past three years.
Of investors with more than one adviser, 88 investors, or 65%, said that they consider one of their advisers to be their “primary” adviser.
Of that 88, just 17 had an answer for what they consider the most important attribute of a primary adviser. The top answer, chosen by about 60% of them, was that the primary adviser helps guide a client's financial life.
According to State Street, those answers suggest that advisers have an opportunity to define and fill the role of primary adviser for many of these clients.
Those findings are backed by a survey Cerulli Associates Inc. released yesterday of 400 high-net-worth families. It found a sharp increase in the number of advisers used by wealthy individuals, with many, though not all, choosing one “alpha adviser.” The Cerulli survey showed that 64% of U.S. households with at least $10 million in investible assets are working with four or more advisers, a huge increase from 2008, when barely 16% of that group had four or more.
