Although the stock market has recovered substantially since 2008, the legacy of the recession is still affecting the way the ultra-high net worth market looks for third party advice.

According to a Phoenix Marketing International survey, wealthy investors with over $5 million in investable assets have been looking to take more control over their investments and reduce some of the complexity of their portfolios. Results showed that 38% of the so-called penta-millionaire group were becoming more actively involved in their investments following the recession, and 61% percent are using their advisors selectively compared to 39% before the recession.

“This whole attitude toward becoming more involved has given rise to a more selective use of advice and advisors,” the managing director of the Phoenix Affluent Practice, David M. Thompson, said. “There’s something going on here in terms of wanting to change the relationship that they have with their financial advisor.”

It was not that the ultra-wealthy market, which comprises approximately 910,000 households in the U.S. and often has assets with multiple managers, lost trust in their advisors, according to the survey.  “Because of the attention that they typically get more of from their advisors, the [penta-millionaires] generally are and have been more trusting,” Thompson said.

Rather, as part of taking control, they are looking to develop a closer relationship with a primary advisor who can take the helm and help them to manage assets which may be complicated and spread between firms and different types of wealth managers, according to Phoenix Marketing International. Among those penta-millionaire investors who said they were “taking control,” 76% reported that they “would prefer to do more of my financial business at one institution that can bring together the specialists and services that I need,” the study said.

“Further upmarket, the whole taking control phenomenon takes a little bit of a different form,” Thompson said. “We’ve seen an increased demand for having that financial quarterback, that lead advisor who can not only help them to kind of keep track of their diverse holdings, but more importantly to be able to manage the risk that’s inherent in all of those different portfolios.”

While penta-millionaires’ holdings may be too diverse to consolidate under a single quarterback advisor, they are looking for that advisor to take the lead making sure that some of their larger positions are not working against each other.

“This lead advisor would help them to manage that risk and to be able to reconfigure or make recommendations to reconfigure these portfolios so that they are working together,” Thompson said. 

Since the assets are spread around, it may be difficult to charge for the advice, however. Some advisors use a fee-based approach, but many are simply using it to help aggregate more assets and strengthen client relationships, he said. 

"From what we've seen, the advisor who’s trying to play that quarterback role doesn’t collect a fee for that," he explained. "They’re more interested in the service as an aggregation tool and as a way of building an increasing rapport with their affluent client."



Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access