Senior Protection

Al DavisAs part of my Financial Advice: A Top Ten List yesterday, I emphasized the value that an advisor can provide by protecting seniors from making mistakes or being defrauded.  That (summary) point deserves some additional commentary.

As I noted, research confirms what most of us have seen among our families and friends.  Simply put, the ability to make effective financial decisions declines with age, often rapidly.  Continue reading

Advisor Disconnect

Schwab has issued the results of an interesting new survey examining the views of high net worth investors (those with at least $1 million in investable assets) and their advisors. Some particularly noteworthy findings follow.  Note the frequent disconnect between advisors and their clients.

  • HNW investors think investing is easier than their advisors do. While 59 percent of advisors think it will be difficult to reach their clients’ goals with the current market climate, only 32 percent of clients think so.  Moreover, fully 25 percent of clients think it will be easy to meet their financial goals compared to only 12 percent of advisors.
  • According to 81 percent of HNW investors, creating retirement income to last a lifetime is their primary investment goal.  Their advisors think that only 64 percent of HNW investors have that as their primary goal.
  • According to the advisors, HNW investors’ primary investment strategies are evenly split (50:50) between capital preservation and asset appreciation.  Fully 69 percent of HNW investors favor capital preservation.
  • Roughly twice as many men as women (41 to 21 percent) are the sole or primary decision-makers, but women are still involved in 59 percent of the decision-making.
  • Only 7 percent of HNW investors say that their desire for advice has decreased since 2008 while 37 percent say it has increased.
  • HNW clients choose a new advisor most often for greater attention/service (66 percent) and to obtain a more holistic approach to their investments (51 percent). However, 37 percent were looking to protect their assets and 37 percent were looking for better performance.
  • HNW investors learn of their advisor via referrals from friends/colleagues (23 percent), family members (17 percent), financial institution (9 percent) or from another professional (9 percent).  Only relatively few HNW clients are obtained through events (4 percent), media (3 percent) or an ad (1 percent).
  • HNW clients listed knowledge (71 percent) and advice (59 percent) as the key benefits of working with an advisor.  But 49 percent listed investment performance.  Moreover, trust (48 percent). service (47 percent), objectivity (43 percent), fiduciary responsibility (40 percent) and independent thinking (35 percent) also received a lot of support.

Some very tentative conclusions from this data follow.

  1. HNW clients think investing is far too easy.  I suspect that means that advisors are not dealing with risk and their clients’ risk tolerances adequately. It also suggests that good advisors are undervalued.
  2. Everyone agrees that retirement income is the primary goal, but there is still a wide disconnect between advisors and their clients.  If advisors are not focusing on retirement income, they are not meeting their clients’ felt needs.
  3. HNW clients want to be safe and rich.  Managing that minefield will continue to be a major problem for advisors.  As a consequence, the value of clear, consistent and detailed communication as to what investment decisions are being made and have been made as well as the reasons for them cannot be overemphasized.
  4. The emphasis by HNW investors on a holistic approach as well as the desire for objectivity, fiduciary responsibility and independent thinking provide further evidence that the era of the product-pushing salesman is over.  It’s like World War II after D-Day —  there would be losses and uncertainties along the way, but the end-result was basically decided.