Mass affluent demand personal service

Mass affluent demand personal service

The tremendous growth in online sources of investment and money management information has not decreased the need for professional advice among the wealthiest US households, according to a new report by Spectrem Group. In fact, says Spectrem, it may have contributed to increasing the demand for personal advisors.

"We've seen a steady increase among the affluent in their reliance on advisors," remarks Judy Danielson, a director of the Chicago-based strategic consulting and research firm.

Between 1998 and 2000, the use of professional advisors jumped from 61% to 74% among high net worth households - those with $1 million or more of net worth, according to the study.

"Clients may be more informed about investment options, but they want help discerning the best choices. Like the role played by a personal shopper in a department store, they want their advisors to point them to the best choices to make their decision process simpler," Danielson says.

For the research, Spectrem concentrated on the 19 million US households with incomes of $100,000 or higher and/or net worth of $500,000 or more (excluding primary residence). This group includes 6.3 million households with a net worth of over $1 million. These investors, while representing only about six per cent of total US households, currently control nearly 60% of the country's $18.6 trillion in investable assets, says Spetrem.

An increasing number of affluent households have turned to independent advisors in recent years, the study notes. Today, over one-third of affluent investors consider an independent, such as a Registered Investment Advisor or Certified Financial Planner, to be their primary financial advisor, equaling the number who use a full service broker in this capacity.

Danielson says the importance of a prominent brand name is diminishing in importance for investors. "When choosing an advisor, high net worth households first look at the name and reputation of the advisor rather than the brand name of the company or firm the advisor works for," she says. "Independent advisors are perceived to listen to the needs of their clients and tailor investment recommendations specifically to those needs."

The publication of the Spectrem research coincides with the launch by German online broker Direkt Anlage Bank of an advisory service for small investors with more than EUR1000 to invest. The broker says it will act as an intermediary to a network of independent financial advisors. The initiative comes against a backdrop of falling tech stock prices and waning demand for execution-only services.

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