Hearts & Wallets: Fewer investors are turning to financial professionals

Fewer investors are turning to a financial professional as their primary provider for investment advice, according to a new survey from Hearts & Wallets LLC.

The report indicates that less than two-thirds of investors now use a financial services professional. Just 21 percent of investors say they use a financial professional as their primary provider of investment advice, down from 25 percent in 2011.

Usage dropped sharply among households with $100,000 to $500,000 and $2 million plus in investable assets, the report states.

The report adds that nearly six in 10 (57 percent) investors rely on family and 47 percent turning to friends. Emerging investors put the most trust in friends and family, coming in at 64 percent for friends and 82 percent for family.

“Fewer individuals are turning to financial professionals for advice,” says Hearts & Wallets Principal Laura Varas. “Hearts & Wallets believes this is because the industry is unable to fulfill the three screaming investor unmet needs as expressed in more than 60 Hearts & Wallets focus groups over the past three years. Ordinary Americans are frustrated with brokers, financial planners and other advisors because their value proposition is unclear, pricing is opaque, and there is no way to evaluate providers except to measure absolute return.

“At the same time, there are many proof points that obtaining professional help leads to better outcomes,” Varas adds. “Full-service distributers must address these issues, and product manufacturers should do everything they can to help in this effort.”

Banks and self-directed firms gained market share in primary relationships at the expense of full-service firms, the study indicates. The primary firm is the firm with the largest share of household investable assets under management (AUM).