For the first time ever, the number of mass affluent investors who are choosing independent financial planners is on par with those using full-service brokers, according to a new report from the Spectrem Group.
In its report, “Mass Affluent Investor 2009,” the Spectrem Group found that the number of mass affluent households using full-service brokers as their primary advisor fell to 22% in 2009 from 30% a year ago. Meanwhile, the number of these investors using independent financial planners as their primary adviser rose to 22% from 20%.
George Walper, Jr., president of Spectrem Group, says that clients are now looking for more than just help with investing; they want someone to help them plan their futures, including their retirements.
“A year ago 99% of Americans said [the economic meltdown] was the biggest event of their lifetimes,” Walper said. “And things haven’t gotten any better. By that I mean they’ve still lost a lot of assets, unemployment is still high. They see this as a complete generational change.”
Among the key findings in the study: Although mass affluent households remain concerned about the future and their ability to maintain their standard of living, the panic has subsided. Yet, 50% are still concerned about their own jobs or their spouse’s job. Most respondents experienced a 30% to 40% drop in their net worth. Investors have also adjusted their risk tolerance and are focused on protecting principal and saving—this means their likelihood of investing in anything other than cash in the near future is minimal. The shift to a more conservative investing approach could be in place for another five to 10 years, according to Walper.
“Even the younger investors, those between 35 and 50-years-old are more conservative than ever before,” Walper said.
The Spectrem study also reveals the top five concerns for mass affluent households in 2009: A prolonged economic downturn (82%); maintaining their current financial position (74%); having enough money set aside for retirement (71%); inflation (68%) and the financial situation of children or grandchildren (68%).
“[Advisers] really, really need to understand the psychological impact [the economy] has had on clients and what clients expect from them,” Walper said. “Clients are sending a strong message to the advisor community.”
The Spectrem report is based on the online polling of 1,498 households. Mass affluent is defined as those with $100,000 to $1 million in net worth, not including primary residence. This sector accounts for approximately 30 million households in America. Polling was conducted in July. The data have a margin of error of plus or minus 2.5%.