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Fidelity, Russell Surveys Find Disparity in Advisor-Client POVs

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Fidelity Investments announced on Thursday the results of its third Insights on Advice survey. The report found that millionaire investors and financial professionals differ on three key issues. First, millionaires are more bearish on the market than other advisors and brokers. Second, millionaires are twice as likely as brokers or advisors to prefer e-communications and texting. Finally, brokers and advisors plan to weight emerging and international markets and annuities more heavily in their portfolios.

Advisor Optimism Outpaces Millionaire Investors

Financial professionals are generally more confident about the economy 

than millionaire investors. Brokers and advisors indicated higher levels of confidence than millionaires for the next 12 months across all indicators, including the economy, stock market, real estate, consumer spending and business spending.

Despite being more confident overall, brokers and advisors reported low levels of confidence in real estate, an opinion shared by millionaires. While both groups ranked their confidence in business spending and the stock market as the least of their concerns, this is where the disparity in opinion was largest.

Another area financial professionals and millionaire investors agree to disagree is in their investment plans. Both groups plan to increase their portfolio investments in the next year, but millionaires are looking at conservative investments, and are more interested in domestic investments. The groups differ vastly on annuities; 60% of brokers and advisors with millionaire clients said they will increase their investments in annuities, while just 13% of millionaires agreed. This disparity could be a problem for advisors, as the report found over half of millionaires want to work with someone who shares a similar philosophy on investing.

Where millionaires are confident, though, brokers and advisors are not. Less than half of financial professionals said they use or were willing to use “technology-enabled media,” like text messaging, smartphones and social media, compared with 85% of millionaires. Furthermore, two-thirds of millionaires said they would like to use technology-enabled media with their advisors. Geographically, this opens opportunities for advisors; 37% of millionaires said they would “definitely consider working with a non-local advisor.”

Sanjiv Mirchandani, president of National Financial, a Fidelity Investments company, stressed that advisors’ reluctance to adopt technology is costing them in time and money, as well as client satisfaction.

“With the average age of advisors increasing, the younger generation of brokers and advisors have an opportunity to differentiate themselves through their communications approach and attract new clients –specifically, clients under 50 who are most actively using technology,” he added.

An aptitude for technology isn’t the only thing millionaires are looking for from an advisor. The top three benefits cited by millionaires who already have an advisor are superior performance, wealth protection and access to investments.

Advisor-Investor OptimismRussell Investments’ Financial Professional Outlook supports Fidelity’s conclusion that advisors are not on the same page as their clients. In a report released Wednesday, Russell found that while advisors want to focus on issues like performance, inflation, estate planning and taxes, their clients are focused on larger concerns about government policy, market volatility and global events.

Like the Fidelity survey, Russell found advisors are far more optimistic than their clients, but noted that the gap hasn’t changed much in several quarters. While three-quarters of advisors say they feel optimistic about capital markets for the next three years, just 29% believe their clients are also optimistic. Russell found a sentiment gap of 48% in May 2011, down just slightly from 51% in November 2010.

“Some of advisors’ optimism stems from their sources and advisors’ own abilities. They’re experts, and should understand” economic indicators, Kristin Gibson, director of strategic partnerships for Russell Investments, told AdvisorOne on Friday. Furthermore, “advisors have tools that show they have reasons to be more confident, while clients only have the media,” she added, where information may be limited to headlines and snippets.

Russell found that most advisors believe their clients come to them first for advice, but noted that 92% of advisors said their clients bring ideas to them from news and media sources.

“When we see where clients are getting their ideas,” according to the report, “this seems to conflict with how advisors view their role in client relationships.”

“If you look at the big picture,” Gibson noted, “there are concerns, but it’s not the terrible economic picture the media leads investors to believe.”

The most important thing for advisors to remember, she said, is to acknowledge their clients’ fears and realize that even though they have the information and expertise to recognize that the economy is not as bad as their clients imagine, “to investors, it’s a real concern. Advisors need to educate their clients and understand how it truly impacts the big picture for them.”


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