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Life Health > Annuities

Survey Finds Affluent Want Security

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Now that the market has been in a downturn for well over a year, affluent investors are looking to advisors for ways out of a rut, according to a survey commissioned by Nationwide Financial, Columbus, Ohio.

Wealthy investors are consulting a greater number of sources for financial advice than last year, the data indicates.

Respondents showed a strong preference for expertise when asked about factors they consider when selecting an advisor. They say that they want more security and are less willing to take risk.

A demonstrated track record of success remains the top factor, for 84% of those surveyed. A recommendation from a friend or colleague was considered a very or extremely important factor by only 58%, compared to 80% last year.

“Affluent investors are taking extra steps to ensure theyre dealing with the best advisors,” says Mathew Greenwald, president of Greenwald & Associates, the independent polling firm based in Washington, D.C., that conducted the third annual Nationwide survey.

“Even though a comprehensive financial plan was the second-most important service an advisor could provide [65% of advisors], these clients are now more interested in protection and security.”

Sixty-one percent of high-income investors surveyed this year said they are unwilling to take substantial financial risk for substantial gain, a 10% increase since last year.

Michael C. Butler, senior vice president of NFS Distributors Inc., says this is due to the longevity of the market downturn.

“People have lost confidence and are looking for guarantees [and] protection features,” he says.

Respondents positive impression of mutual funds, stocks and money market accounts decreased from last year by as much as 10%.

However, positive impressions of products with protection features increased by up to 10%. But more than 25% of high-income clients still report they are not at all knowledgeable about variable universal life insurance, variable annuities, income annuities or long-term care insurance.

Advisors should see this as an opportunity to educate their clients about products that include protection features, such as income annuities, fixed annuities and whole life insurance, Butler says. Advisors can tell their clients they can wrap mutual funds and stock options inside protective vehicles.

“Theres a huge opportunity to fill in the gap in education,” he says. “The things clients are looking for are there.”

The survey polled 500 people with annual household incomes greater than $150,000 per year. Respondents were younger than 60 and were either engaged in financial planning or intending to be involved in it in the near future. Respondents included attorneys, medical doctors, corporate executives or small business owners.

Among the survey findings: 45% rated education about financial markets as a very or extremely important service provided by an advisor (up from 36% in 2001); 43% felt education about financial products was a very or extremely important service (up from 37% last year); needs assessment, investment risk and return analysis and planning for unexpected financial downturns each increased in importance compared to last year.

Sixty-eight percent said they check their advisors advice with their own research (up 4% from last year).

Respondents who use the Internet to research specific investments increased from 74% to 81%.

Similar to 2001, high-income professionals said again this year they were motivated to begin financial planning because they werent sure they were properly preparing financially for retirement (74%), and they have seen people not prepare and therefore struggle in retirement (64%).

They listed planning for income management in retirement as the most important service a financial advisor can provide (67%).

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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