Disillusioned, But Loyal: Wealthy Stick With Advisers

The majority of high-net-worth investors have stuck with their financial advisers despite heavy losses to their portfolios as a result of the financial crisis that have left them “highly distrustful and disillusioned."

“There is a lot of irony from the survey. Investors are disillusioned but they optimistic,” said Jim Neuwirth, the managing director of Northstar Research Partners. “Investors have been burned by the market. Some have even been burned by their advisers. They have lost money, but they are sticking with their advisers.”

According to the Northstar/Sullivan Rebuilding Investor Trust Survey, wealthy investors plan to follow the advice of their adviser, but don’t plan to work with other financial advisers in the future. This is in contrast to a report released this week by Aite Group that found that financial advisers lose a majority of their customers to online brokers.

Eight-nine percent of wealthy individuals surveyed who had an adviser when the market downturn began are still working with that same advisor, and 20% said that they are relying on their adviser even more than before.

Additionally, 61% said that they have a high level of trust in their primary financial adviser. Only 27% of respondents say trust in their adviser has declined since before September 2008, but just 10% of the 1,539 high-net-worth investors surveyed said that they highly trust financial advisers or financial institutions in general.

“We are dealing with a highly cynical investor base that still loves their financial adviser,” Neuwirth said. “I think it is a lot like people that say, ‘I hate the healthcare system, but I love my doctor.’”

According to Northstar’s research, bank-based advisers scored the lowest with wealthy individuals, as 78% of respondents said that they planned to stick with their bank adviser. By comparison, 89% of wealthy individuals who use a financial planner at a national or regional firm and 82% who work with a full-service brokerage firm plan to remain with those advisers.

Neuwirth said wealthy individuals are sticking with their adviser because they are unsure something better is out there and because they have developed strong personal relationships with their advisor.

In the wake of the financial crisis, Neuwirth said wealthy investors are more engaged in financial news and are focused on “finding ways to move forward effectively.” Seventh-nine percent of wealthy investors blame “big Wall Street firms” for the market meltdown. The vast majority of respondents favor greater oversight of financial institutions, as well as additional oversight of financial advisers.