Advisors gunning for millionaire clients now have 1.3 million more prospects to choose from—and a blueprint for what they’re looking for, according to a new survey.
Affluent Market Insights 2005, conducted by the Spectrem Group, a Chicago-based research firm, says that 1.3 million new American households became millionaires in 2004—a 21 percent increase from 2003. This swells the ranks of millionaire households to 7.5 million nationwide. The number of households with a net worth of $5 million or more (excluding primary residence) grew by 38 percent, reaching a record total of 740,000. At the lower end of the affluent market, households with a net worth of $500,000 or more grew 25 percent, to 13.1 million, in 2004.
Unfortunately for advisors, many of these affluent seem eager to go it alone when it comes to managing their finances: 30 percent of all affluent households make all or most of the financial decisions without professional assistance—a figure that “is much higher than in the past,” according to Spectrem.
Further, 32 percent only use an advisor during major life events, such as divorce or retirement. And while 28 percent prefer to make investment decisions themselves with some advice from their advisor, only 10 percent rely on their advisor to make all investment decisions.
The affluent investors who want help managing their finances tend to favor full-service brokers. Indeed, 29 percent of those with $1 million to $2.9 million in investable assets said as much. Those with $3 million or more split their allegiances, with 21 percent saying their primary advisor is an independent financial planner and 20 percent saying he’s a full-service broker. Accountants, private bankers and investment advisors are the primary advisors of choice for those with $500,000 to $999,999 in investable assets.
Among the affluent that use an advisor, most are happy with the relationship. Seventy-three percent of affluent investors said so in 2004, as opposed to 70 percent in 2001 and 83 percent in the go-go days of 1999. However, “unresponsive service” and “unacceptable investment performance” are what they were unhappy about. These were also the most common reasons affluent investors changed advisors in 2004.
Not surprisingly, clients said the frequency of client/advisor interaction was commensurate with the client’s assets. Twenty-seven percent of those with $3 million or more in investable assets said they were contacted weekly, as opposed to 6 percent of the $1 million to $3 million group and 2 percent of those with $500,000 to $999,999. According to the survey, advisors to the lower end of the affluent segment aren’t doing a good enough job: 36 percent of the $500,000 to $999,999 group said they received “too little” communication.
