High-Net-Worth Clients Looking For More From Advisors

By Brian O'Connell

Despite robust portfolio returns, high-net-worth clients are lukewarm on their advisors, a new survey found.

That disconnect should serve as a warning shot to advisors to stay on their toes while seeking to improve service.

Satisfaction with advisors hovered around 60 percent in the first quarter 2018, according to Capgemini’s 2018 World Wealth Report. The 60 percent figure is actually an improvement over recent years.

“Even with a year-over-year increase in satisfaction, this was still below a “passing grade” of 70 percent,” the report stated.

The survey results come at a time when investors are in a jubilant mood, having enjoyed robust investment returns, as the report noted.

Among other findings, the report found that:

• The wealth of individuals with $1 million or more of investable assets surpassed the $70 trillion threshold, with 1.6 million people joining their ranks globally.
• High-net-worth wealth grew by 10.6 percent year over year, a sixth consecutive year of gains, and will surpass $100 trillion by 2025.
• North America and Asia/Pacific accounted for 75 percent of the increase in the global high-net-worth population.

Yet all those gains were not enough for high net-worth clients to embrace the job their investment advisors were doing on their behalf, the report stated.

The findings suggest that “returns alone cannot sustain a wealth management business,” Capgemini noted. “Only 55.5 percent of HNWIs globally said they connected strongly with their wealth manager, despite substantial investment returns over the past two years.”

Technology Gap?

Why the disconnect among portfolio performance and client advisor services satisfaction?

Some experts say it’s all about technology, which advisors aren’t embracing at the level expected and needed by clients.

“Client expectations aren't too high these days,” said Nathan Garcia, a wealth manager at Strategic Wealth Partners in Washington, D.C. “Companies like Personal Capital, Motif and Rebalance IRA have changed the landscape for wealth management.

“These types of services are offering custom portfolios to align with client’s personal beliefs and they’re making it easier to follow performance, and better understand wealth management.”

The reality is that most advisors have not made the client experience any better by leveraging technology, Garcia noted. “The value for clients is more focused on relationship management and financial planning than it is on investment performance,” he said.

The service component is paramount to sustaining quality relationships, others say, and clients expect an effort from advisors to make that happen.

“No one buys an iPhone because it makes a great call; they buy it because of the thousands of other features it offers that offer reprieve from the mundane stressors of everyday life,” said Ashley Agnew, associate director of relationship development at Centerpoint Advisors in Needham, Mass.

The same goes for investment management with HNW families, Agnew said.

“Although returns and performance are the cornerstone of an advisor's evaluation, it's not the glue that holds the relationship together,” she added.

'Extra Steps'

What high-net-worth families appreciate is the “extra steps taken outside of investment strategy that help them streamline their cash flow,” Agnew said.

Things like explaining home financing options, maximizing philanthropic efforts, talking to their children about the basics of finance, and checking in after a family emergency.

Dissatisfaction toward advisors may also be due to a failure, on the part of the advisor, to make his or her value proposition clear.

“Many advisors offer a broad range of services, of which investment management is only one component,” said Erin Donahue, a financial planner and owner at Plan with Erin in Morris Plains, N.J.

Thus, it’s understandable that a client might be underwhelmed by investment results that are in line with market returns when similar returns could be achieved thorough a low-cost exchange-traded fund.

However, if that same investor were also to take advantage of the advisor's other services - such as tax planning, retirement planning, insurance consulting, or estate planning - they would likely feel a greater satisfaction from the relationship.

Some wealth managers say the key is to think like a wealthy person.

“Advisers need to put themselves in the client's shoes,” said Joseph Sherman, a project
adviser at Janus Thinking. “More than high returns from their advisers, they want a luxury experience.”

Rather than simply dining at gourmet restaurants, wealthy clients often have the chef come to their home. They don't go to a retail jeweler to purchase a ready-made piece like everyone else in the mall, they have the jeweler bring an exclusive collection of gems to create a family heirloom, Sherman said.

“This is the level of service they are getting at every other encounter,” he said. “Why should advisers be any different?”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].