Advisors are missing opportunities to better serve their affluent clients in several areas, a Dow Jones study found, including retirement planning, tax strategies and estate planning. The Dow Jones Affluent Investor Study, released Monday, found that while advisors have strong bonds with their clients, they don't "fully leverage those bonds to serve their clients’ broader financial needs."
In fact, greater numbers of affluent investors are becoming "self-directed" investors, relying on their own research and abilities to invest their money, even while they continue to use an advisor. In a webinar held Tuesday on the survey, Thomas Coyle, special writer for Dow Jones Newswires compared investors to passengers in a car. Before the recession, he said, investors were satisfied to sit in the back seat. Now that those clients are more educated and asking more "pointed questions," they are sitting in the front seat. "They don't want to drive, but they want to see what's going on," Coyle said.
Jason Zweig, a columnist for The Wall Street Journal, pointed out that even if clients are investing some of their money through online brokerages, advisors still have a role in their clients' financial lives.
"It's remarkable," Zweig said in the webinar, "that everyone isn't self-directed given how easy and cheap that's become. The reason that more people aren't self-directed is that they don't want to be." There are several reasons clients may not want to do their own investing, Zweig said. "They may want someone else to blame when things go wrong, they may want someone else to validate their decisions, and they may just not want to be bothered. But in any case, as the financial world continues to grow more complex, it seems pretty obvious that the share that advisors can have of the typical investors' wallet probably isn't going to go down very much."
Despite 41% of affluent investors who said online or discount brokerages were their primary investment channel, 63% said they rely on their financial advisor or broker for advice, more than any other source. Furthermore, 47% said they rely on their advisor the most.
The majority of respondents – 95% - said they were satisfied with their advisor, and 42% said they were "very satisfied." Still, there are topics affluent investors want to advice on, but aren't currently receiving from their advisors; namely, tax strategies, estate planning and emerging markets.
Meir Statman (left), professor of finance at the Leavy School of Business, Santa Clara University, said in the webinar that advisors are not in the position where they should compete with financial commentators like Jim Cramer on forecasting what will happen in the markets. Their job, he said, is to "manage not just wealth and not just the investments, but really the life and well-being of their clients."
In that duty, he said, there "really is no substitute. Advisors should have great insight into the life of their clients, their families, their children, the issues that are unique to them and often painful. If they focus on that part where they have no competition, they're really going to do a great favor to their clients and to themselves."
There's room for advisors to step up their retirement planning offerings, as well. One-third of investors say they have not developed a retirement plan with their advisor. Of those who have developed a plan, almost all indicated some degree of confidence that they will achieve their financial goals, and 44% said they were "very confident."
Investors indicated newsletters are an effective means of communication. Two-thirds of affluent investors receive a newsletter from their advisor, and of those more than three-quarters read it regularly.