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Fidelity: 45% of Millionaires Wouldn’t Recommend Their FA

By Alex Padalka August 4, 2016

A slim majority of millionaires who work with financial advisors would recommend their own advisor to others, but one in five of those who would not are so dissatisfied that they may dissuade others from contracting their advisor or are thinking of leaving themselves, according to a new study from Fidelity.

While 55% of millionaires who have an advisor are likely to recommend their services to friends or colleagues, 45% would not, according to a survey of 1,287 investors with at least $50,000 in investable assets conducted in January for Fidelity Investments by TNS, an unaffiliated third-party research firm.

Among the latter, 20% said they may part ways with their advisor or discourage their contacts from working with them, according to the study. But there are still opportunities to win clients among millionaires – 38% don’t work with an advisor to manage their wealth, the study found.

For millionaires who are happy with their advisors, the relationship can be quite strong. Among those who would recommend their advisors, 65% consider them their friends, according to the survey. Meanwhile, clients’ recommendations translate into a lot of business. Referrals from current clients bring 48% of new business for advisors, according to a separate survey of 600 registered investment advisors conducted for Fidelity by an unaffiliated firm in May through June 2014. With referrals being such a driver of new clients, advisors need to work out the formula to make millionaire clients happy, Bob Oros, head of the RIA segment at Fidelity Clearing & Custody Solutions, says in the recent report.

In a separate study, Fidelity found that its retirement plans on average rose in the second quarter despite dramatic market volatility during the period. The average balance in a 401(k) plan grew close to 2% compared to the first quarter, although that’s still 2.5% worse than the year prior, according to an analysis of 22,000 defined contribution plans and 14.2 million plan participants, excluding Fidelity’s own employees, non-qualified defined contribution plans and tax-exempt accounts.

However, the average individual retirement account grew only slightly compared to the first quarter, and remains 7% lower year-over-year, based on analysis of 8.2 million Fidelity IRA accounts.

In addition, the study found more and more investors are turning toward a “do it for me” approach, with the number of 401(k) investors in a managed account or a target date fund reaching a record 45% by the end of the second quarter, Fidelity said in its press release.

Meanwhile, long-term Millennial investors’ savings at Fidelity have also reached a record: for those who’ve had their 401(k) for 10 years, the average balance has grown to $92,900 by the end of the second quarter, or 10% higher than a year ago, the study found.