Many Mass Affluent Shy Away From Advice

By Cyril Tuohy

InsuranceNewsNet

A survey of mass affluent investors with between $100,000 and $1 million in investable assets has found that their No. 1 reason for not hiring a financial advisor is that they don’t believe advisors are looking out for their best interests.

The second most cited reason for not hiring an advisor is that mass affluent investors don’t believe they have enough wealth to warrant having an advisor, according to the Advisor Relationship and Changing Advice Requirements research conducted by the Spectrem Group.

If the mass affluent believe advisors don’t care enough about them, then advisors are going to have a tough slog attracting middle-class investors who, in theory, have even less in investable assets than the mass affluent.

Results of the survey published this week found that 36 percent of mass affluent investors don’t believe an advisor would represent a client’s best interests, and 31 percent said they don’t have enough assets to interest an advisor.

The survey also found that 28 percent of the mass affluent said they could do a better job than a paid advisor, 27 percent said they could not afford an advisor, 15 percent said they didn’t know who to turn to for an advisor, and 9 percent said they get help from friends and family.

So what would force a mass affluent investor to seek advice?

The survey found that 59 percent of the mass affluent would consider using an advisor if they received a big pot of money — for example, winning the lottery, inheriting a small fortune or making it big in the stock market.

Mass affluent investors under the age of 35 are more likely to consider using an advisor in the case of a specific need (56 percent versus 17 percent of investors over all), while mass affluent investors between the ages of 45 and 64 are most likely to consider using an advisor in the event of a financial windfall, Spectrem also said.

The mass affluent are a coveted group. Although they represent a far less lucrative demographic than the high net worth segment, there are a lot more of them.

Spectrem estimates there were a record 38.6 million households in the United States last year with a net worth of more than $100,000, and only 132,000 households with a net worth of more than $25 million last year.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].