Rich and restless

Advisors catering to the wealthy are facing a challenge — one that represents an opportunity to those looking to break into the affluent market: The wealthy are restless.

That was the key message from Keith Sjogren, director of strategy consulting at Investor Economics, speaking this week at the Strategy Institute’s tenth annual conference on Marketing Wealth Management Services to High Net-Worth Individuals.

According to Investor Economics research, the wealthy appear to have mixed feelings toward their service providers. By far the most commonly used channel is the full service broker, with 64% of survey respondents currently using one. But brokers also had the highest turnover, with 25% of respondents saying they had used one in the past, but did no longer.

Sjogren says full service brokers were even more commonly employed just five years ago, when the percentage of wealthy investors using their services was “in the high seventies.”

Discount brokers, investment counselors and financial planners were less commonly used, but also had much lower loss rates. For example, only 34% said they currently employed an investment counselor, while 15% said they had in the past but no longer did.

Having attained their wealth, the majority have rather conservative financial objectives, with just 38% focused on capital accumulation. More conservative goals, such as capital preservation and income generation, are the focus of 35% and 16% respectively, while 6% are most interested in tax minimization and 5% are concerned with debt reduction.

While full service brokers were acknowledged for the transparency of their fees, the wealthy are critical of the level of fees they pay, and question the value they get for their cash. It seems there can be such a thing as too much transparency.

Sensitivity to fees increases with age, understandable considering clients are likely taking a more conservative tack in their senior years and earning lower returns. Among those surveyed under the age of 50, 46% said they tracked the fees they paid for their financial services. That figure rises to 57% among wealthy investors aged 70 to 79.