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Affluent Investors Prefer Human Advisors—With a Catch: Wells Fargo Survey

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The latest Wells Fargo Affluent Investor survey has some good news for financial advisors but it comes with a caveat: Half of affluent and high net worth investors say they would never be comfortable working with a robo-advisor and 75% say a robo-advisor would never replace their financial advisor, but 50% say they’re likely to try one within the next five years, and 80% want 24-hour access to investment information.

Not surprisingly younger investors—in their 30s and 40s—were the mostly likely to try a robo-advisor, which the survey refers to as an Automatic Investment Advisory Specialist, or AIAS.

“Advisors need to realize that expectations about technology are not going away,” says Joseph Nadreau, managing director for innovation and strategy at Wells Fargo Advisors. “They need to look for ways to have technology complement and augment their relationships with clients. The most successful will embrace technology.”

The survey found that 61% of affluent investors, defined as having between $250,000 and $1 million in investable assets, have a financial advisor, while 67% of high net worth investors — those with more than $1 million assets — do. That suggests plenty of opportunity for advisors to expand their market. Altogether these two groups of investors have a median $450,000 invested in the market.

Among those investors who do have an advisor, 7 in 10 feel his or her advisor is as important to them as their doctor and almost all are satisfied with the quality of service they’re getting. “People who have advisors feel very loyal to their advisors,” says Nadreau.

Close to 90% say they want their advisor to do more than just invest their money. They want their advisor to be partner in financial planning, which presents another opportunity for advisors. “Investors ought to take that to heart” says Nadreau. “More and more want help with life goals, including estate planning. They have a very high degree of expectations.”

A key part of estate planning is the transfer of wealth to beneficiaries. While seven out of 10 affluent and high net worth investors – which we will now refer to as “affluent” investors – have taken steps to pass on their wealth to heirs, almost 30% have not, which represents another opportunity for advisors. 

“You would have expected that more investors would have taken the appropriate steps to transfer wealth but many are fearful of discussing it with family,” says Nadreau. “That’s where an advisor can help…. It forces the type of conversations about wealth transfer after death.”

The survey found that almost eight out of 10 affluent investors are confident about their ability to manage and investment their money – 68% have self-directed investment accounts – but more than half are worried about losing money in the stock market and most 40% don’t trust themselves to manage their investments during market turbulence. This, too, presents an opportunity for advisors given the frequent volatility in the markets.

But advisors who can’t deliver investment results should beware. Poor returns are one of the primary reasons affluent investors give for dropping their advisor. (The other key reasons are personality conflicts and not using a holistic approach.)

Overall affluent investors, not surprisingly, are well positioned for retirement. Those with investable assets between $250,000 and $1 million say they’ve half of the $1.2 million they will need for retirement. Those with more than $1 million investable assets say they’ve saved three-quarters of the $2 million they want to have put aside. Sixty-two is the median age these investors expect to retirement and more than half anticipate 25 years or more in retirement.

While affluent investors are better prepared than others for retirement, their regrets and fears are the same as those with far less assets.  About 40% regret not making better investments, one-third fear they will run out of money in retirement and 32% fear they will be taken advantage when they are older.

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