Financial advisers don't always see eye-to-eye with their affluent clients, according to a recent study by Fidelity Investments. The nationwide study, which surveyed 510 affluent investors and 320 advisers, revealed differences in perception over clients' priorities and needs, as well as the most effective means for attracting new clients.
For one, financial advisers seem to overestimate the importance of their personal relationships with affluent clients and underestimate the value of investment performance. Half of affluent investors surveyed said that portfolio performance is more important to them than the strength of their relationship with the adviser, compared with about one-third of advisers. And almost twice as many affluent investors as advisers (63% versus 33%) cited improved investment performance as the chief reason for transferring assets.
One professional explained that advisers are always trying to guide investors away from chasing portfolio performance. "During periods of very poor performance, it doesn't surprise me that advisers don't stress performance as the most critical and important aspect of the relationship," said Charles Hughes, CFP at C G Hughes Co. in Bay Shore, N.Y.
"On the other hand, even in good times, we try to de-emphasize the performance. That is an ongoing effort. We haven't done a very good job of it, I must admit," he said.
The wealthier the investor, the more investment performance mattered. Of those with $5 million or more in investable assets, 84% said performance track record was crucial to their selection of a primary adviser. That fell to 68% for investors with less than $5 million to invest.
Advisers also thought that their clients had grown more satisfied with them, as well as more dependent on them, in recent years, but clients differed on both accounts. Only 20% felt more satisfied with this relationship today versus a year ago, compared with 54% of advisers who felt clients were more satisfied. Meanwhile, close to 30% of affluent investors said they are more reliant on their primary adviser relationship today than two years ago, while 59% of advisers believed their clients were more reliant.
In any case, satisfaction rates remained high: Some 92% of affluent investors said they are satisfied with their primary adviser relationship. "What we read into that is that there seems to be a universal understanding that the markets have been down and that everyone's portfolio is suffering," said Paula David, senior vice president for the Fidelity registered investment adviser group. "As we climb out of the bear market and performance returns, it will be interesting to see if those satisfaction levels will change," she said.
The kinds of service clients want more of didn't always match up with what advisers were willing to offer. More than a quarter of affluent investors said they want concierge services (like art advisory and travel services), but only 12% of advisers said they would be willing to provide these services. And while 26% of advisers admitted that clients are asking for tax-planning services, only 13% of them said they would consider offering these services. Fee-based advisers were more likely than commission-based advisers to offer additional wealth management services, however.
"Concierge services do seem to be outside the realm of investment services and financial services," said David, while tax-planning services in many ways do not fit into the commission-based sales model.
Finally, while everyone seemed to agree that referrals are the best way to pick up new clients, advisers and investors disagreed on the effectiveness of social settings, events and seminars to round up those referrals. Some four in 10 advisers think traditional social settings, like cocktail parties and golf outings, are good ways to meet new clients, but only one in 10 clients said they have found their adviser that way.
Commission-based advisers were more than twice as likely as fee-based advisers (45% versus 20%) to win clients with special seminars and events. As for cold calling, four times as many commission-based advisers compared with fee-based advisers believe it's a good way to attract clients.
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