The Return of the Full Service Broker/Dealer?

Full service broker dealers are regaining favor among affluent investors, according to the Spectrem Affluent Study 2005. But even as the Chicago-based Spectrem Group’s study shows that more affluent investors are using full-service brokers as their “primary advisor,” the study reports that the affluent are more satisfied overall with their financial planners, investment advisors and investment managers, than with brokers.

While the percentage of affluent investors who use full service brokers as their primary advisor–31% in 2005–has been climbing back from a low point in 2004 of 24%, they are not yet back to the 2002 level of 45%.

So, why did the numbers decline in the first place? The results over the years show that “affluent investors are influenced somewhat in their thinking by how the market is performing,” says Spectrem Group’s President, George H. Walper, Jr. After a few tough years, with the market now trending upward “they’re a little more comfortable using brokers as advisors.” He adds that in their research about Ultra High New Worth investors, defined as those who have investable assets of $5 million and above, “we see that that industry as a whole has really done some significant enhancements to their product offerings, far more of them are advice-based as opposed to strictly talking about product, so that industry has recognized that they had to change from the ’90s when they were the dominant player. They haven’t fully recovered, but they clearly have reversed the trend.”