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Industry Spotlight > Broker Dealers

Return of the Broker?

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Full-service brokers are regaining favor among affluent investors, according to the Spectrem Affluent Study 2005. But even as the research showed that more affluent investors are using full-service brokers as their “primary advisor,” the study found that the affluent are more satisfied overall with their financial planners, investment advisors, and investment managers than with their 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%, it’s not yet back to the 2002 level of 45%. So why the decline in the first place? The results over the years show that “affluent investors are influenced somewhat by how the market is performing,” says Spectrem Group’s president, George Walper. After a few tough years, with the market now trending upward “they’re a little more comfortable using brokers as advisors.” In Spectrem’s research about ultra-high-net-worth investors–those with investable assets of $5 million and above–”we see that that industry as a whole has made some significant enhancements to their product offerings; far more of them are advice-based as opposed to strictly talking about product. They haven’t fully recovered, but they clearly have reversed the trend.”

But the market’s recovery doesn’t fully explain why the affluent are going back to full-service brokers. Partly, Walper says, it’s that there is less press now about conflicts of interest and scandals within the brokerage industry. Full-service firms have also become more tuned in to what customers want, with wider ranges of non-proprietary products and more fee-based programs.

However, Walper says, “we do see that fee based advisors–[whether they are a] financial planner or investment advisor–have consistently in the last three or four years had a much higher degree of satisfaction than brokers, in terms of their clients’ evaluation of them.”


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