Ultra-Wealthy Wary of Trusting a Single Advisor

The good news: ultra-wealthy individuals tend to put their trust in wealth managers.

The bad news: most, still cautious after the Financial Crisis, tend to use multiple advisors.

“Wealthy investors typically have many advisors, including accountants and attorneys,” Michael Farrell, managing director for SEI Private Wealth Management, told Financial Planning. “Financial advisors can add value by acting as wealth managers. They have to change their role from being just someone on the team to acting as co-pilot. In that role, wealth managers can interpret myriad advice from all the other advisors and show the client how to work it into the overall plan.”

According to an SEI survey of multi-millionaires, respondents continue to use financial advisors. Responding to the question, ‘When it comes to difficult financial decisions, from whom do you feel most confident getting advice?’, 39% selected “wealth advisor,” far ahead of “attorney/accountant,” in second place with 22%. Drilling down, wealth advisors were the top choice of 53% of retirees, 48% of those 50-59 years old, and 46% of those 60 or older.

Ultra-wealthy investors remain insecure about their wealth. The average multi-millionaire believe they would only feel financially secure with double the assets they currently have, according to an SEI survey.

For those under the age of 50, they’d need more than three times their current net worth to feel financially secure.

SEI teamed up with Scorpio Partnership to poll 162 multi-millionaires last year. The retirees, business owners and corporate executives responding to the survey had $11.8 million of average assets. Typically, the wealth target to achieve a level of financial security was $22.8 million, nearly twice as much as respondents’ current net worth. Among respondents under age 50, with average net worth of $5.5 million, the average response indicated they would need $19.7 million to feel secure.

The bottom line is that even the wealthiest clients want to keep accumulating wealth, and many rely upon financial advisors to help them do so. With that in mind, how can advisors attract ultra-wealthy clients, retain the ones they already have, and get referrals to still other affluent individuals?

“We have found that a robust, deep discovery process is vital,” Farrell said. “A lengthy face-to-face meeting that includes family members can reveal the most critical issues for those individuals. That knowledge can help an advisor build a strong alignment with clients’ goals.”