Millionaires Question Adviser Performance

During the financial crisis, millionaires did not express satisfaction with their advisers’ performance, but independent advisers fared better, a SpectremGroup study found.

U.S. households worth $1 million or more saw their assets decrease by 30%, according to the study. Overall, adviser satisfaction levels have dropped from 60% in the spring to 40% at the end of 2008.

While directly blaming the government and Wall Street for what happened to their assets, millionaires also show signs of questioning their advisers’ performance, said Catherine McBreen, managing director of SpectremGroup, in an interview with “You would think that in a tumultuous time that you would be turning to an adviser,” but that’s not the reality, she said. Although millionaires understand that it wasn’t their advisers fault they lost the money, they don’t think the adviser necessarily helped them lose less than they could have, she explained.

Less than half (36%) of millionaires indicated their adviser performed well during the crisis and only 14% said they will increase their use of financial advisers in the future, according to the study. In fact, 12% are considering getting rid of their adviser altogether, but most are waiting for the economy to stabilize, and then planning to sit back and reflect on what value the adviser added, McBreed said.

Independent advisers overall had more satisfied clients, with 56% of investors with an independent adviser saying their adviser performed well during the crisis, compared with 40% of investors using full-service brokers, according to study data.

In addition to the overall anger people felt about losing money, another surprising result of the study is the number of affluent Boomers planning to delay retirement, McBreed said. Baby Boomers show panic because of the crisis, with 45% of those five to 10 years out from retirement planning to push back their retirement date. Furthermore, more than half of Boomers plan to move investments to cash, according to the study.

The study said investors will look toward advisers and providers with more scrutiny in the future. McBreen said investors will begin to compare how advisers perform to other advisers.

So Now What?

McBreen pointed to a couple things advisers can keep in mind in order to retain business in the future. Many investors surveyed felt that what advisers offered was something the investor could find on his own through the Internet or television. “They feel like their adviser needs to come to them more proactively,” she said. Now is the time to show clients the value of a face-to-face relationship.

The study said that moving toward a fee-based compensation system might also build more trust with clients. “Don’t let them feel that you are churning their account or just moving assets around to gather fees,’ the study said.

McBreen also mentioned “plain old-fashioned customer service.” As previous Spectrem research has found (see “Call of Duty: Returning Client Calls Most Important Loyalty Sign), the value of returning client phone calls is essential. Clients generally expect a response in two to three hours, not two to three days, McBreen said. She noted a startling statistic from the study: “Almost a third of these people had not been contacted by their adviser during this crisis…Why would you stay around?’

The study, “Attitudes of Affluent Investors on Surviving the Economic Crisis,” is based on the online polling in November of 750 households, as well as focus groups.



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