Affluent Investors Don’t Rely Solely on Their Financial Coach

By Cynthia Stephens, VP of Marketing, ByAllAccounts on Tuesday, August 20th, 2013

“Today’s affluent investor is like a Tom Brady or Peyton Manning,” says Stephen Kraus of market research specialist Ipsos MediaCT. “The coach will call in a play but he is comfortable changing it.”

The advice of a professional advisor is only one of many inputs into the affluent investor’s decision making when it comes to financial decisions.

The Ipsos MediaCT affluent investor surveys indicate that Affluents are hungry for information. “They are omni-channel consumers,” says Stephen. “They read the national newspapers, get information on tablets and often rely on multiple sources.”

Surprisingly, Stephen told me that Affluent readership of national daily newspapers, such as the Wall Street Journal, increased from 2011 to 2012.

For these self-reliant Affluents, however, only (23%) regularly consult a financial professional before deciding on money issues.

 “There’s a lack of trust among Affluents,” says Stephen. “Even if we go upstream, to investors with $500,000 in household income and a net worth of $3 - 4 million, they will tend to have more than one advisor in part because of lack of trust.” 

Affluent Investors

Today’s affluent investors represent the top 20% of the country when it comes to average household income of $200,000. Stephen tells me that they control 70% of the net worth in the United States. And according to the 2012 State of the Affluent Consumer report, nearly two out of three Affluents get some kind of professional financial advice.

Ipsos MediaCT Definitions:

Affluents:           $100,000+ in household income; average $500K in investable assets; Mid 40’s

Ultra-Affluents: $250,000+ in household income

Wealthy:              $500,000+ in household income

 

What Advisors Can Do

In the wake of these trends Stephen’s advice to financial advisors is to “demonstrate performance”. He believes that Affluents have a lot of people that want to manage their money and are seeking trust. The way to get there according to Stephen is to “show that you deliver.” 

In addition to performance, there’s an opportunity to provide value by offering guidance on alternative investments.

“Today’s affluent investors grew up in a world of mutual funds,” says Stephen. “That’s their schema for thinking about investments.” 

In the past few months The Mendelson Affluent Barometer has shown a declining interest in gold. In past few months Stephen has seen growing Affluent optimism about the economy, which is partly why he feels that enthusiasm for gold is dropping.



But, it’s more than just Affluent sentiment that’s driving changing enthusiasm for gold.  When it comes to buying gold, it isn’t as straightforward as mutual funds.

Stephen says “there is uncertainty on how to invest in gold.  What do I do?  Buy gold bars, stocks?”

This presents an opportunity for advisors to educate Affluents on how to invest in something other than a mutual fund.  Alternatives are outside the affluent investor schema for thinking of investments.  “This is a time when Affluents would look for professional guidance,” says Stephen.

Stephen Kraus is SVP, Chief Insights Officer, Audience Measurement Group, Ipsos MediaCT, author of three books on affluence and success in America. For more information visit www.ipsos.com.
 

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