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HNW Investors Put FA’s Trustworthiness Above Returns

November 16, 2017

High net worth investors value their financial advisors’ ethics and trustworthiness over their fees and performance, according to a recent survey by practice management research outfit AbsoluteEngagement.com. However, advisors may need to better demonstrate their value, as almost half of investors are dissatisfied with what they get for the fees they pay, the survey found.

Trustworthiness was cited by 80% of high net worth investors as “critically important” when assessing their financial advisor, according to an August survey of 585 U.S. investors with at least $500,000 in liquid assets who work with an advisor. Eighty percent also cited ethical standards and 77% prioritize knowledge, the survey found. Meanwhile, three-quarters put the most stock into long-term investment returns, according to the survey.

High net worth investors also want to understand how their advisors are held accountable: 88% want to know that the advisor would be stripped of their credentials if they failed to meet ethical standards; 86% want their advisors to be certified; and 86% like knowing their advisor meets standards on an ongoing basis, such as through continuing education, the survey found.

But trust and knowledge are far from the only issues important to affluent investors, and advisors may have to do more to show their worth. While 67% of respondents say fees are important to them, only 53% believe they’re getting good value for their dollar, according to the survey.

When it comes to what wealthy investors think they’re paying for, 46% say it’s financial planning, 36% cite wealth management, 35% say it’s retirement solutions — but 59% cite investment management, the survey found.

Wealthy investors continue to put most of their assets into real estate, according to a recent Tiger21 report cited by ThinkAdvisor. While allocations to the sector dropped off 2% from the second quarter, they still accounted for 31% of invested assets in the third quarter, Tiger21 found. Real estate and public and private equities accounted for 70% of affluent investors’ portfolios, ThinkAdvisor writes.

Allocations to hedge funds inched up 1% to 4% of their portfolios and commodity allocations dropped from 1% to none. Cash allocations remained the same at 11%, as did allocations to currencies, still at zero, Tiger21 found, according to ThinkAdvisor.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.