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Retirement Planning > Retirement Investing

Survey: Advisors disappoint high net worth

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While increasing numbers of high net worth investors are seeking professional financial advice, many say they are getting turned off by their advisor’s “lack of initiative,” according to the 10th annual Phoenix Wealth Survey released Monday. What’s more, retirement fears have mounted to their highest level in the study’s history (which dates back to 2000).

The study is a Harris Interactive poll of more than 1,700 people with $1 million or more in net worth (excluding their primary residence), who were polled in January and February.

According to survey results, the HNW are increasingly seeking financial advisors, but many expressed slipping satisfaction with them. Seventy-three percent said they are getting advice from a professional advisor compared with 67 percent last year, but the numbers are surprisingly low given the difficult times, says Walter H. Zultowski, Ph.D., senior vice president of Research and Concept Development at Phoenix.

Twenty-seven percent do not receive advice from any advisor – a decrease from 33 percent in 2008 – and more than a third do not have a primary financial advisor, down from 41 percent in 2008. Yet despite more wealthy investors actively seeking professional advice, 13 percent said they expect to find a new advisor in the next 12 months, up from 8 percent in 2008.

More than a third said their advisors are not proactive in maintaining contact, an 11 percent leap from 2008. In response to the current conditions, nearly a quarter say they initiated contact with their advisor, compared with 27 percent who were contacted by their advisor. Most stunningly, according to Phoenix, 51 percent have had no contact with their advisor or don’t have an advisor.

Contact isn’t the only problem, however, according to the survey. Nearly one-third said their advisor doesn’t offer products or services they need. And the perception appears to be growing; The number of people saying their advisors don’t provide what they need has doubled over the past five years.

“These data suggest a missed opportunity for advisors,” said Dr. Zultowski. “The keys to successful client relationships in a negative wealth environment are maintaining contact and bringing them new, innovative solutions for their financial needs and concerns.”

Fears about retirement have peaked, with concerns running the gamut, from outliving assets (45 percent versus 36 percent in 2008) to having to modify their current lifestyle (44 percent versus 37 percent in 2008) to needing to replenish their retirement savings (34 percent versus 28 percent in 2008).

“Driving the anxiety are worries that poor investment performance will erode assets and inflation will diminish the value of their income,” said Dr. Zultowski. For example, 51 percent cited investment performance as a concern, a jump of 12 percentage points from 2008.

Gloom and doom outlook

The percentage of millionaires feeling pessimistic about their financial future has surged six-fold since the Phoenix Wealth Survey began. The survey shows the high net worths’ view of financial security has flipped since last year, with 74 percent saying they felt less wealthy than they did a year ago.

“The continuing economic turmoil has stripped America’s millionaires of their confidence and sense of security; they are feeling far worse off than they did during the last economic downturn in 2003,” said Dr. Zultowski. “This pessimism has affected their attitudes about their financial future as well as their behaviors.”

According to study results, it took only two years for optimism levels to drop by half, with 17 percent of the HNW reporting a high level of optimism about their personal financial future as compared to 34 percent in 2007. Those who said they were “extremely” or “very secure” for the long term plummeted to 28 percent from 45 percent in 2007.

The survey’s “gloom barometer” is in fact gloomy. The ratio of pessimists to optimists is about two-to-one, with 59 percent expressing doubts about the state of the national economy in the next one to two years compared to 30 percent of optimists.

Dr. Zultowski calls 2009′s numbers “particularly stark” when compared with the last bear market in 2003. At that time, 37 percent said they were pessimistic about the economy for the next one to two years.

Today’s millionaires are similarly downbeat about the return of the equity markets to more sustainable growth levels, according to survey findings. Close to two-thirds see improvement in the next 13 to 36 months. A smaller but significant group – 17 percent – predicts that a return to sustainable growth levels will take longer than 36 months.
Survey findings reveal preserving wealth has become the priority for the HNW.

Half of survey respondents say they have become more risk-averse and significantly more – 59 percent – are investing to preserve assets versus 41 percent for return. In 2000 – the study’s inaugural year – the investing priority for 56 percent of respondents was return with just 44 percent saying their goal was to preserve assets. The prior peak in the high net worth’s interest in preserving assets – 58 percent – was in 2003, the last time the economy skidded.

The investing priority shift has resulted in more people adding bonds and exchange traded funds (ETFs) to their portfolios, with an increase of 5 percent for bonds (52 percent) and 6 percent for ETFs (20 percent).

“Surprisingly, even though the high net worth are taking action, they remain confused about investing,” said Dr. Zultowski. Half of those surveyed say they are confused about the best way to invest their money, a marked increase from 32 percent in 2008 and almost double the percentage in 2007, when just 26 percent of respondents said they were confused.

The HNW don’t foresee any long-term behavior changes. Sixty-five percent say Americans will save more and borrow less in the near term, but when financial conditions improve, they will return to borrowing more and saving less. Just one quarter see a permanent change.


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