Wealthy Investors Unlikely to Share Advisors

The wealthy, it would seem, keep their advisors close to their expensive vests and aren’t keen about sharing their advisor with anyone else, according to a recent survey.

Sure, affluent investors like to think of themselves as loyal to their advisors — you know, a bit like the golden retrievers never leaving their masters in time of need — but that loyalty hardly translates into client referrals to the affluent investor’s financial advisor.

The survey results are detailed in a report titled “Client Loyalty Among Affluent Investors,” published by Spectrem Group, a Chicago-area consulting firm with a focus on high-net-worth investors.

The research was conducted with more than 3,000 affluent investors with household net worth ranging from $100,000 to $25 million.

The survey found that 48 percent of affluent investors who refer other investors to their advisor only do so “sometimes.” Another 42 percent of affluent investors said they “never” refer other investors to their advisor.

Only 10 percent of affluent investors refer other investors to their advisor "very often,” the survey found.

Also, 61 percent of affluent investors who refer other investors to their financial institution only do so “sometimes,” while 30 percent say they “never” refer other investors to their financial institution.

Only 9 percent of affluent investors refer other investors their financial institution “very often,” the survey found.

Affluent investors most likely to refer advisors to other investors tend to be senior corporate executives, advisor-assisted and advisor-dependent investors, the survey found.

Could it be that investors are waiting to see how successful advisors really are at managing their portfolio before he or she refers them to others?

Perhaps. Of this, there is no doubt: As wealth grows, an investor’s loyalty to his or her advisor also grows, the Spectrem Group research found.

“Investors are telling us service quality is the foundation of client loyalty and loyalty based on building a strong relationship is the key to convincing clients to make referrals, which are an important way to generate new business,” said George Walper Jr., president of Spectrem Group, in a news release.

Ultra-high-net-worth investors, those with assets ranging from $5 million to $25 million, exhibit the most loyalty toward their advisor. This phenomenon is due to the fact that the more time an investor spends with an advisor, the tighter the bond, according to Spectrem researchers.

Complex tax-mitigation strategies and shrewd estate planning, which often require hours of discussion among tax experts, legal specialists and financial advisors, are usually cited by the wealthiest families as among the most important aspects of using an advisor.

The relationship between the investor and the advisor is no longer simply about the investment return of a portfolio. Relationships are growing well beyond that.

“In addition to financial advice, investors are also looking to advisors for assistance with matters related to the broader life issues of retirement, insurance and health care,” Walper said.

InsuranceNewsNet Senior Writer Cyril Tuohy 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].