Affluent tastes

Affluent clients with less than $2.5 million US in assets are more likely to shop around for investment firms and financial advisors than richer clients are, a new Forrester Research study has found.

The frugality of consumers diminishes with wealth — up to a point. The more money consumers amass, the more likely they are to pay more for products and services to save time and avoid hassles. While nearly two-thirds of those with assets between $2.5 million US and $4.9 million US in investable assets admit to this, the willingness to pay more to avoid hassles drops off at the $5 million US mark. Just 47% of consumers with more than $5 million US share that attitude.

The ultra-wealthy are also more likely to give their financial institutions and advisors low marks. According to the report, while 78% of consumers with assets between $1 million US and $4.9 million US say their advisor meets their needs, only 69% of clients with assets above $5 million US feel the same way.

Across all of the different financial services consumers were asked to rate, Forrester found the only places where the $5 million US – plus crowd gave their financial services providers higher marks was for life insurance and estate/tax advice, albeit to a lesser extent.

Sixty-two per cent of clients with $5 million US say they are content with their life insurance providers versus 55% of those affluent with less than $5 million US. At the same time, 71% of the ultra-rich consumers feel their estate/tax advisors meet their needs, whereas 69% of the less affluent say so.

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The study also breaks down what types of asset classes the affluent are putting into their portfolios. Interestingly, stark differences emerge when consumers have about $2.5 million US in investable assets. At that threshold, consumers appear to move away from mutual funds and annuities while ownership of stock options and exchange-traded funds steadily increases with wealth.

Mutual fund ownership increases the most, from 8% of the least affluent consumers to 79% of consumers with as much as $2.49 million US, before falling sharply for consumers with even more assets. (See figure below.)

The study was comprised of two online surveys of affluent American consumers. The first survey sampled a broad set of consumers while the second survey sought out affluent consumers with at least $1 million US in investable assets.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(11/20/06)