2010 Oechsli Institute - Affluent Research

2010 Research Report
Affluent Investor Study

The Oechsli Institute & Nationwide
2010 The Oechsli Institute. All Rights Reserved. | For Broker/Dealer Use Only - Not For Use With The Public.ved
The Oechsli Institute
Introduction
Introduction
The landscape of the financial services industry remains in the midst of a radical change. These changes have transformed the attitudes and behaviors of affluent investors and the financial advisors who work with them. This has created a tremendous opportunity for financial advisors and teams who are able to understand todays affluent investor, make the necessary adjustments, and commit themselves to meeting their expectations. In an our ongoing effort to stay abreast of affluent investors financial concerns, the Oechsli Institute, in partnership with Nationwide Financial, conducted a 2010 Q1 study on the affluent. The objective of this study was to remain up-to-date on what is important to todays affluent in the midst of this financial crisis, especially with regards to their relationship with financial advisors. We studied three key areas as they relate to the affluent investors relationship with the financial services industry: Marketing: Since it appears that every financial advisor is marketing his or her services to the affluent, we wanted empirical evidence as to which marketing tactics are most effective and what factors into the affluent consumers selection of financial advisors. For instance Personal introductions are the most effective by a wide margin, whereas cold calling and direct mail were extremely ineffective. Very few affluent investors found their current financial advisor as a result of those mediums. Reputation (Trust) and first impression regarding professionalism and competency are the most important factors todays affluent investor uses in selecting a financial advisor. The quality of the actual proposal and the specific investment recommendations were much less significant. When asked which type of client event they would prefer to attend, small social events were at the top for both attendance and willingness to bring a guest. Loyalty / Service: Nothing is more important to financial advisors than being able to develop loyal affluent clients. The loyalty of todays affluent investor requires personalized service coupled with truly comprehensive wealth management. All of which is linked with statistical significance to affluent client acquisition (marketing). For instance There are 16 factors critically important to todays affluent investor / financial advisor relationship. Advisors should be aware of and attentive to all 16. The two most effective mediums of communication are in-person-meetings and telephone calls. The least effective are brochures and personal websites. Of the top 5 issues that would cause todays affluent to search for another advisor; the top three involve personal service and communication. Financial Solutions: Financial advisors rank highest amongst all financial professionals for full trust of unbiased advice. The trust of todays financial advisor is linked to providing a comprehensive array of financial services and the professionalism in how they are delivered. For instance Nearly two-thirds of working affluent investors remain concerned about their familys financial health. Lifestyle in retirement is the greatest concern for both working and retired alike.
1 www.oechsli.com | 2010 The Oechsli Institute. All Rights Reserved. | For Broker/Dealer Use Only - Not For Use With The Public. ved
Introduction
Only 25% of financial advisors are perceived by their affluent clients to be providing a very comprehensive planning approach to managing their finances. The above is only a small sampling of what we discovered. For this report, weve outlined several core areas for financial advisors looking to acquire more affluent clients, strengthen the loyalty of existing affluent clients, and develop a better understanding of the financial solutions (products and services) that are important to todays affluent investor. The results in this report reflect the responses of over 400 qualified respondents, all of which have over $500,000 in investable assets (83% had investable assets between $750,000 and $10 million and 55% between $1 million and $5 million). The data collection was done through online survey. Basic univariate results are presented directly. When statements or significance are made, they are based on the results of common statistical methods for the type of survey data and reflect the use of a 5% margin of error as a standard for measuring significance. Any group comparisons presented reflect significant difference in group responses.
Demographics
Demographics
Investable Assets The majority of respondents (83%) fell into the $750,000 to $10 million currently invested or available to invest category, with 55% falling into the $1 million to $5 million category. This grouping represents the affluent sweet spot for most financial advisors. Net Worth The financial crisis has had a direct impact on many affluent residential home values. Since home value has always played a significant role in calculating a familys net worth, it remains to be determined how the concept of net worth will be viewed in the future. However, todays affluent are concerned about their overall financial health.
Income All incomes fall into what the Bureau of Labor Statistics refers to as the top quintile income earners. Although these figures have become somewhat fluid as a result of this financial crisis, 29% of respondents are still earning over $200,000 a year.
Age The two largest age categories of respondents fall into the 50 to 59 and 60 to 69 age brackets. That said, it is nearly evenly divided between over 60 years of age (52%) and under 60 (48%). Only 6% of respondents are under 40, which indicates that this group is still actively involved in the accumulation of wealth.
Under 40 40-49 50-59 60-69 70 or older 5% 10% 32% 38% 14%
Demographics
Gender Women are becoming increasingly more involved in the decisions concerning their familys financial affairs. The fact that 41% of our respondents were female is a strong indicator of their influence. Financial advisors should involve both husband and wife when offering advice regarding family finances. a serious affluent prospecting opportunity. Nearly half of all affluent investors are prospects for the simple process of consolidating all of their familys financial affairs.
Number of Financial Professionals The majority of respondents view themselves to be working with only one financial advisor. However, the greater the level of assets the greater the probability affluent investors are currently using more than one advisor. This is significant in as much that todays affluent desire to have a primary go-to financial advisor overseeing their familys financial affairs and highlights both an opportunity and a concern. From the perspective of concern; financial advisors need to take the necessary steps to ensure they are the primary go-to financial advisor for their affluent clients. From the perspective of opportunity; financial advisors should work to become the primary go-to financial advisor for affluent investors who have multiple advisors elsewhere. This underscores
Marketing
Marketing
Selecting A Financial Professional The affluent make major decisions predominantly through word-of-mouth influence; they place significant emphasis on the opinions of people they trust and respect. Selecting a primary financial advisor is a major decision and it should be no surprise that 54% made their selection as the result of a personal introduction from a family member, friend, colleague or another professional. This is face-to-face marketing. It is important to note the small percentage of affluent investors influenced by public seminars (6%), direct mail (2%), telephone solicitation (2%), or the internet (1%). Marketing to todays affluent investor is all about cultivating personal relationships. Even the 17% in the Other category were predominately personal (my friend, my neighbor, etc.) with just a handful responding that they were inherited / assigned to a financial advisor by management. investors and other professionals. Stimulate positive word-of-mouth amongst affluent clients and centers-of-influence. Make certain youre positioned as the trusted primary financial advisor for your affluent clients. Without trust, theres no penetrating centers-of-influence. Work to develop personal relationships with CPAs, attorneys and other professionals. This goes beyond a simple business arrangement. Be cautious about investing money in impersonal marketing activities for the purposes of acquiring new affluent clients.
Factors in Advisor Selection After carefully studying this chart you will discover that 76% of the factors that todays affluent investor considers most important in selecting a financial advisor refer to the reputation and trust of the individual. At 16%, the importance of the advisors firm is much less significant. The actual proposal (specific investment recommendations, etc.) presented to an affluent prospect and his or her reputation regarding a specific area of expertise both have minimal impact on the selection process (7% and 6% respectfully).
Advisor Takeaways: Get Face-to-Face: This is the only way to develop meaningful relationships with affluent
Marketing
Advisor Takeaways: Make certain your affluent clients are aware of every service you are providing and the value they are receiving. Be covetous of your reputation Expand your depth and breadth of industry knowledge. Be a consummate professional in every manner; dress, demeanor, community involvement, etc. Second Opinions The greater the level of investable assets of todays affluent investor, the greater interest in having a second opinion on their portfolio. Basically, 7 out every 10 affluent investors with $5 million or more of investable assets would entertain a second opinion on their portfolio and only 3% responded with an absolute no. Again, this highlights a valuable prospecting opportunity and a note of caution. Although financial advisors should be looking to offer second opinions to affluent prospects, they need to be taking the necessary steps to make certain that their affluent clients would not accept such an offer.
Would Accept a 2nd Opinion on Their Portfolio
$500K to under $750K $750K to under $1M $1M to under $5M $5M and up
Perception of Client Events Financial advisors should take note; when it comes to inviting todays affluent clients to an event, they are most likely to attend an intimate social event (36%) and to bring a guest (42%). This doesnt mean that only 4 of 10 would attend a small social event; this was a forced ranking. Respondents were asked to choose which event they would be most likely to attend and to which they would be most likely to bring a guest. The types of events used range from a small dinner party, to a wine tasting, to a night at the theatre, to a sporting event the list is endless. This finding suggests that financial advisors who are interested in acquiring new affluent clients should always have their clients invite a guest to these intimate non-business fun events. These small scale social events create an ideal environment for establishing trust and building relationships with your affluent clients and their friends, family and colleagues. Large scale social events are not preferred (12%) by todays affluent investors. It is also important to take note that the financial crisis has fueled affluent investor interest (35%) for upto-date information on the economy and market related issues, although theyre not as willing to bring a guest (30%) as they are to small scale social events. These events are still far more effective than product focused events (17%).
80% 70% 60% 50% 40% 30% 20% 10% 0% 2% 8% No 7% 3% Not Likely Most Likely or Yes 37% 33% 23% 28% 61% 60% 71% 69%
Marketing
Advisor Takeaways: Keep your events small and social. Hold your events regularly; monthly or bimonthly is ideal. Hold quarterly or semi-annual informational events related to the market. Your affluent clients will attend and many will bring a guest. The financial crisis has fueled a hunger for unbiased information updates regarding the economy and markets. Avoid public product-focused seminars and large client events. person when he asked for the contact information. Todays affluent investors do not like sales people. Referrals/Introductions Given Last year A whopping 68% of affluent clients have given zero (42%) or one (26%) referrals or introductions to their primary financial advisor over the past year. This highlights both a challenge and an opportunity. The opportunity is obvious; affluent investors will introduce their primary financial advisor to a friend, colleague or family member if approached properly. However, too few referrals and introductions have actually happened. Thus the challenge for financial advisors is to master the art of penetrating affluent centers-of-influence. Your affluent clients will allow this to happen if 1) they trust you, 2) they feel strongly about the services you provide, and 3) you make it easy for them.
Intimate Client Event Examples Advisor A: Jane invested $105, held a wine tasting event and landed a $1.2 million new client. How? She held the event in a local art gallery at no charge (owner was happy to have potential affluent customers in his gallery), purchased good quality, well priced wine (a friend is a distributor), and cooked the finger food herself. She invited five good clients and four brought a guest. Everyone had fun, no real business was discussed, although two of the guests were interested in a second opinion regarding their familys finances. To date, one of these guests has become a client. Advisor B: Robert invested over $1,000 on a surprise birthday party for a top client and landed no new clients. Why? He called his clients spouse, offered the idea of a surprise birthday party (his 65th), she thought it a wonderful idea until Robert asked her to provide him with the contact information of his closest friends and colleagues. Her response was If I get you this list, you must NEVER solicit business from them ever! The birthday party was a big hit, everyone loved it, but Robert had lost the spouses trust because he came across too much like a sales
Methods Acceptable for Introductions These findings highlight a wonderful opportunity for todays primary financial advisors. Affluent clients will recommend you if asked by someone (90%), will offer your name to someone complaining about their financial advisor (80%), and will provide unsolicited introductions and referrals (70%) if they
Marketing
like, trust and respect you. However, elite financial advisors are not reactive. They dont wait for clients to determine who they think might be dissatisfied or who they should meet. These advisors know that affluent dissatisfaction is rampant, they assume their affluent clients feel strongly about them, and theyre proactive in orchestrating these personal introductions and referrals. Decision to Hire Based on Professional or Firm For todays highly skeptical and guarded affluent investor, the financial advisor is the product. 67% of affluent investors are making their decision on their primary financial advisor based on the reputation, first impression, professionalism and perceived competency of the individual advisor. Only 14% are making their decision based on the institution with which the advisor is associated. This suggests that financial institutions should invest heavily in advanced training for their financial advisors, as the more professional and client centric they are, the more the institution strengthens its credibility with affluent investors.
Advisor Takeaways: Remember that 90% of your clients feel strongly enough about you as a financial advisor to recommend your services. Be proactive in orchestrating personal introductions and referrals. Spend time refining your affluent sales skills; they need to be seamless. Hold small social events and invite top clients and guests. Spend more time with your affluent clients and centers-of-influence. It accelerates word of mouth influence.
Advisor Takeaways: You the individual financial advisor are the product. Financial advisors must be able to communicate, demonstrate, and quantify their value. Professionalism and a consistent client experience are essential.
Marketing
16 Advisor Commandments The following 16 criteria are extremely important to todays affluent investor. It shows that they expect more services, higher levels of service, and more personal attention from their primary financial advisor. As you read through these 16 criteria, assess how well youre currently performing in each criterion using the following scale: 1=Not Well, 2=Somewhat Well, 3=Moderately Well, 4=Very Well 9. Being focused on overseeing my familys financial affairs, not marketing his/her practice. Performance Rating: _______ 10. Keeping you informed of any events that might impact your familys finances. Performance Rating: _______ 11. Developing and communicating a financial recovery strategy for your family. Performance Rating: _______ 12. Helping create and execute an up-to-date formal financial plan. Performance Rating: _______ 13. Cares about my family more than just my investments Performance Rating: _______ 14. Coordinating all of your familys investment decisions. Performance Rating: _______ 15. Helping you organize and keep up-to-date all your important financial documents. Performance Rating: _______ 16. Using outside experts (specialists) to help with other financial areas. Performance Rating: _______
1. Always having your familys best interests behind every financial recommendation. Performance Rating: _______ 2. Providing clear and timely communication. Performance Rating: _______ 3. Resolving problems quickly and to your satisfaction. Performance Rating: ________ 4. Meeting investment performance expectations. Performance Rating: _______ 5. Possessing a comprehensive breadth and depth of industry knowledge. Performance Rating: _______ 6. Delivering high-level personal service. Performance Rating: _______ 7. Fully disclosing all fees. Performance Rating: _______ 8. Fully understanding your familys goals and needs. Performance Rating: _______
Marketing
Your next action step is to identify two to three areas that need the most attention and take specific action steps to improve in those areas. It is important to remember that all 16 criteria are important in the eyes of your affluent clients and prospects. 1. Improvement Area: ______________________ Action Steps: ___________________________ ______________________________________ 2. Improvement Area: ______________________ Action Steps: ___________________________ ______________________________________ 3. Improvement Area: ______________________ Action Steps: ___________________________ ______________________________________ Note that only one of the 16 important criteria is meeting investment performance expectations, so it is important that financial advisors understand that there are 15 other areas that are important to todays affluent investor. Financial advisors need to begin taking, if they arent already, a comprehensive approach to handling their affluent clients financial affairs. Providing a full array of services, having the appropriate personnel, and delivering Ritz Carlton quality with FedEx efficiency have all become essential for working with todays affluent investor. Advisor Performance Effect on Referrals The charts on the following page illustrate both the challenge and opportunity confronting financial advisors as they endeavor to work with todays affluent investor. Because each of the 16 criteria presented in these charts are rated as Important to affluent clients, every advisors challenge is to perform Very Well within each of the criteria. These charts illustrate significant room for improvement. These charts also highlight a real opportunity; financial advisors who were rated as performing Very Well by their affluent clients in these areas received more referrals than their counterparts who were deficient in these areas. Across the board we would like to see a higher percentage of advisors being rated as performing Very Well with each of these sixteen criteria. Also, the future for prospecting is bright for financial advisors who do perform well with these criteria and are able to proactively generate introductions and referrals as opposed to waiting to be given a referral. As indicated in this report, financial advisors, even those who are perceived to being doing a good job with their affluent clients, are not performing well at acquiring new affluent clients. That said, the following data shows two distinct groups; those affluent clients who gave zero referrals last year and those who gave one or more referrals. The results prove that advisors who perform better in each of the 16 criteria receive more referrals. For instance, 56% of those who gave one or more referrals rated their advisor as performing Very Well in Developing and Communicating a Financial Recovery Strategy vs. 37% of those who didnt give any referrals.
Advisor Takeaways: Make a commitment to ongoing improvement in every aspect of your practice. Work to improve any of the criterion where you scored 3 or less. If you are on a team, review areas of responsibility regarding these 16 criteria; make any necessary adjustments. Review and reassess your practice against these 16 criteria in six months.
Marketing
Loyalty
Loyalty
Communication Mediums Although the affluent find telephone communication to be effective, nothing will take the place of in-person meetings. It is imperative that financial advisors spend more time meeting with and talking to their clients. The fact that account statements and financial plans are rated highly indicates that todays affluent investor wants specific communication, accurate and easy to read statements, and a comprehensive and updated financial plan. The best advisors combine both personal meetings and telephone calls with clients, not using email as a primary communication medium. Brochures and collateral materials are not effective communication mediums, and if used improperly, they are perceived as sales props. Communication Mediums Rated as Highly Effective
In Person Meetings Phone Calls Account Statements Financial Plan Emails Seminars/Informational Events Firms Website Newsletters Brochure/Collateral Material Advisors Personal Website 82% 80% 77% 77% 57% 33% 31% 31% 28% 24%
portant in-person interaction becomes.
Advisor Takeaways: Increase (if necessary) the personal interaction youre having with your affluent clients. Review all account statements for accuracy and simplicity and make certain your clients understand them. Update and review the financial plan of every affluent client (in person). Avoid relying too heavily on email as a mode of communication. Avoid investing a lot of money on newsletters, brochures, or a personal website. These are all secondary mediums of communication.
In Person Communication Todays affluent investor considers in-person communication to be highly effective. 8 of 10 affluent investors under 50 years of age prefer face-to-face interaction, as compared to 9 of 10 affluent investors over the age of 50. Financial advisors need to take notice; the more face-to-face time spent with todays affluent the greater the probability of having loyal affluent clients. The older the client, the more im-
Issues With Financial Professionals According to our respondents, although financial advisors might think that they are providing high-level personal service to their best clients, 4 out of 10 with $5 million or greater dont feel they are getting the level of service they desire. Nearly half (48%) are annoyed with completing excessive paperwork, 45%
Loyalty
feel that they are always being pitched new products and services, and 45% have an issue with a lack of personal attention. Todays wealthier affluent investors are more demanding and have greater expectations regarding service and operational issues than clients with fewer assets. Delivering a Ritz Carlton caliber of personalized service with a FedEx level of efficiency is essential for advisors working with todays affluent investor. For many financial advisors, this a practice management issue. financial advisor. Repeated mistakes signal a lack of professionalism and a poorly run practice. Interestingly, when a financial advisor pays too little attention to an affluent clients financial affairs, a perception is created that he or she is spending the time marketing their practice, not serving their clients. Although this is not always the case, todays affluent investor is distrustful of sales people and views the financial services industry as being sales-heavy, so they assume that marketing trumps service whenever service is lacking. Poor communication cuts a wide path, but coupled with our earlier findings regarding the two most effective communication mediums (face-to-face meetings and telephone calls), advisors need to devote more time to being engaged in both. Financial advisors are typically surprised to see that investment performance not meeting expectations ranked so low in reasons an affluent client will leave. This doesnt mean performance is not important - it is. However, it is important for financial advisors to understand the other issues impacting affluent loyalty that are more important. More often than not, the key issue regarding performance is managing client expectations.
Advisor Takeaways: The more assets an affluent client has with you, the greater their expectations of both service and efficiency. They are more demanding. Think in terms of Ritz Carlton quality service delivered with a FedEx level of efficiency. Consider two levels of service; one for your wealthier clients and one for everyone else.
Issues That Cause The Affluent to Search for Another Advisor It is obvious that todays affluent investor wants a strong professional relationship with their primary
Loyalty
Advisor Takeaways: Make certain mistakes are corrected quickly and communicated clearly to the client. Make whatever necessary practice management / personnel / procedural adjustments to eliminate mistakes. Review your face-to-face meetings and telephone contact with each affluent client. Make certain youve mastered the art of affluent sales; your sales skills must be seamless! Review each affluent clients fee structure and make certain each client and everyone in your practice is fully aware. Your staff should also be able to articulate your value whenever discussing fees. Even though you are the product, you need to communicate the strengths and stability of your firm and how you conduct due diligence on both.
Feeling About Referring Your Advisor Over two-thirds of todays affluent investors feel positively about referring their primary financial advisor to a family member, friend or colleague. This is extremely significant as it creates a tremendous window of opportunity for financial advisors. However our data also informs us that approximately two-thirds of affluent clients have referred only one person, or nobody, to their financial advisors over the past 12 months. Again, this is an indication that financial advisors either do not know how to penetrate their affluent clients centers-of-influence, or they simply are not being proactive about it. Either way, this is a gold mine for skilled advisors.
Financial
Financial
Full Trust For Unbiased Advice No longer should a financial advisor use his or her firm as an excuse. On a macro level, this financial crisis has eroded affluent investor trust towards the financial services industry. However, as you can determine from the chart below, if an affluent client has a primary financial advisor who is associated with a particular firm, their trust in that firm is elevated with statistical significance. Without a primary financial advisor associated with a firm, todays affluent investors default to their macro view of skepticism towards all distribution channels. Although you, the primary financial advisor, are the product, you still want to communicate your firms strengths to your clients. not reflective of trust associated with their primary go-to financial advisor, it warrants attention. Trust levels need to rise across all age groups of affluent investors, but financial advisors need to pay particular attention towards building trust in the younger affluent segment.
Full Trust In Financial Advisors In general, todays affluent investor doesnt have a lot of trust in people marketing themselves as financial advisors. With the highest level of trust hovering below 50%, it is imperative that financial advisors pay much closer attention to their affluent clients. The younger affluent generation, those under the age of 50, are overwhelmingly distrustful of the profession. This is a warning signal for the future of financial advisors. Although this is a general statement and
Full Trust In Financial Professionals This is the second time (2009 Q3 report being the first) in our history of researching affluent investors that Financial Advisor is ranked as the most trusted. All indications suggest that this is a direct result of our financial crisis. How? Many financial advisors have worked harder and more closely with their affluent clients than ever before; more so than any other category of financial professionals. That said, full trust ranked at 41% indicates that advisors still have a lot of room for improvement. With the previous chart showing full trust of their financial advisors firm at 45%, indicators point to a symbiotic relationship between advisor and firm in regaining the trust of affluent investors. Some advisors, like some firms, are doing a better job than others. On the other hand, CPAs have not increased their
Financial
personal contact with their affluent clients and, from the perspective of the affluent investor (31% trust factor), have done a poor job of managing these relationships in the midst of this crisis. The consequence is that now affluent investors view their CPA differently. Basically the same can be said for Financial Planners (33% trust factor), as they need to make certain they are doing more for their affluent clients than just planning. Because many financial advisors and planners began their careers as stockbrokers and insurance agents, it is important that these professionals work diligently to make certain they are positioned with their clients as the primary financial professional. Advisor Takeaways: Set a meeting with each affluent client to review and organize all their financial documents (one of the 16 important criteria). Whenever assets are discovered to be held elsewhere, have a personal conversation with the client about consolidating those assets with you. by consolidating their investable assets into their professional oversight.
Percentage of Assets Managed By Primary Financial Professional Even though an affluent investor might perceive that they have a primary financial advisor, the majority of working respondents (81%) and over half of those who are retired (56%) have investable assets held elsewhere. Even taking into consideration that many of those who are still working have money in 401K plans, there is still a strong probability that the majority of a financial advisors affluent clients have assets held elsewhere. This is an opportunity for advisors to upgrade many affluent client relationships
Approach to Managing Finances It appears that only one-quarter of our respondents primary financial advisors are currently taking a comprehensive planning approach with their clients finances. Since this is important to todays affluent investor (see the 16 important criteria), it is important for advisors to take a serious self-assessment of the actual services they are delivering. Wherever there are gaps, services not delivered or not perceived as being delivered, financial advisors should work to provide these services. If these services are being provided, it is essential that clients are made aware of all the services they are receiving.
Financial
From a prospecting angle, this signals another window of opportunity for advisors who are interested in acquiring more affluent clients. If todays affluent investor wants a comprehensive planning approach and isnt receiving it, an ideal prospecting opportunity is presented for the financial advisor who is delivering and communicating these services. Advisors Approach to Managing Finances
Oversees only the investments held at his or her institution Semi-comprehensive planning approach to managing our finances 45% 29%
significant dissatisfaction amongst todays affluent investors.
Very comprehensive planning approach to man- 25% aging our finances
Advisor Takeaways: Conduct a thorough assessment of the services you are currently providing. Communicate to your clients the services you are providing; making certain they understand every aspect of what you deliver. Begin delivering, or coordinating the delivery, of any services not currently provided.
Biggest Worry About Retirement This chart needs to be viewed in its entirety rather than each individual category in isolation. Although there is a significant difference between retired and working respondents in the two categories regarding lifestyle change and guaranteed income, the overriding issue appears to be their overall financial health. 80% of working investor concerns and 86% of retired investor concerns center around one issue; having adequate finances for retirement. Combine retirement concerns, financial health concerns, and lack of comprehensive wealth planning, its obvious that financial advisors have serious work to do with their current affluent clients.
Family Financial Health It makes sense that working affluent investors are more concerned about their familys financial health than the retired respondents. However these figures cannot be taken in isolation as our findings have also indicated that although todays affluent want a go-to financial advisor overseeing their familys financial affairs, approximately three-quarters (see previous chart) dont feel that their primary financial advisor is serving in that capacity. In addition, our findings in the following chart highlight serious concerns about lifestyle and financial issues in retirement. All of this speaks to the fact that there is still
Financial
Advisor Takeaways: Stay focused on your affluent clients bigger picture; living comfortably in retirement. Become a knowledge worker. Todays affluent investors have numerous concerns that might impact their lifestyle in retirement; financial advisors must possess the knowledge necessary to provide solutions. Meet with each affluent client and have a serious planning discussion focused on retirement lifestyle. in those considering versus owning REITs and ETFs should also be noted; the larger gaps likely represent a knowledge gap, with affluent investors needing more information before purchasing.
Advisor Takeaways: Focus on conservation of assets and manage growth expectations. Todays affluent investors are more conservative, will invest in products they understand, and are focused on investments that will help in their retirement. Avoid investments that you can not easily articulate, especially with regards to risk and functionality. Develop a strong knowledge base for all investment products with a 50% or greater would consider rating.
Affluent Perception of Various Investments The affluent investors perception towards various investment products needs to be coupled with the 16 important criteria. It appears the todays affluent investors are comfortable with investment vehicles that they are familiar with and understand; individual stocks, mutual funds, bonds, and CDs. However, because of their concern regarding income during retirement, annuities have entered the picture joining the more conservative investment vehicles (bonds and certificates of deposit) where a larger percentage of affluent investors (60% vs. 53%) would consider owning than currently do own. The differences
Expect Advisor to Provide Guaranteed Income in Retirement Financial advisors must understand that the days of chasing yield are over, regardless of how the markets recover. This financial crisis has fundamentally changed how affluent investors think and how they invest. Their primary focus is on protecting their assets and having enough income in retirement. With 76% of todays affluent investors expecting their financial advisor to guarantee income in retirement, advisors need to make this a core part of their comprehensive wealth planning and investment solution process. Expect Advisor to Provide Guaranteed Income in Retirement
Retired Non-Retired 61% 76%
Financial
Advisor Takeaways: Become well acquainted with financial products that provide guaranteed income solutions. Learn how to present these financial products as solutions that are part of your comprehensive wealth management. Would Invest in Guaranteed Retirement Income Solution It comes as no surprise that over 80% of working affluent investors would most likely invest in financial solutions that guarantee them retirement income. However, what does come as a surprise is that nearly 80% of retired respondents feel the same way regarding guaranteed incomes solutions. Financial advisors need to be well versed in the appropriate investment solutions that serve this purpose. With lifestyle in retirement a major concern for todays affluent investor, financial advisors need to become experts at the financial solutions (products) that are capable of guaranteeing income with minimal risk. It appears that nearly two-thirds of financial advisors either are not in possession of this knowledge, or have not communicated it clearly to their affluent clients. Advisor Takeaway: 60% of affluent investors said theyre unaware of financial products that can provide guaranteed income with no risk of loss.
Primary Source of Financial Information Todays affluent investors, both working and retired, are relying heavily (60% and 66% respectively) on their primary financial advisor for information. This is put into perspective when compared to ranking of CPAs; 6% with working affluent investors and 1% for those who are retired. This highlights the importance for financial advisors being up-to-date on the economy, world events, changes in tax laws, etc., and to be continually expanding their knowledge base.
Financial
Self-Directed Investors: Hiring an Advisor Over the Next Year The vast majority (77%) of self-directed affluent investors will not entertain the possibility of hiring a financial advisor during the upcoming year. Yet 23% of working self-directed affluent investors are at least considering it. Advisors should attempt to qualify self-directed affluent investors in advance of spending a lot of time and energy prospecting for their business.
Self-Directed Investors: Reasons for Managing Their Own Finances Even though self-directed investors are clearly not ideal clients, advisors should find it useful to understand their reasoning. It appears that the majority (56%) either enjoy managing their finances or consider themselves highly skilled in the management of their finances. Add the category that involves lack of trust and it seems that there is little opportunity for financial advisors with this group. However, if they are selfdirected because they couldnt find anyone they could trust, thought fees were too high, didnt think they had enough assets, or other you might have a chance.
Self-Directed Investors: Situations Leading to Hire An Advisor Our self-directed affluent investor respondents are telling us that they would hire a financial advisor within a certain set of circumstances. At 71%, illness is ranked at the top, with complex tax issues (59%), and finding a very qualified financial advisor (47%) following in rank order. The message here is clear; keep the lines of communication open with self-directed affluent investors and make certain that they are aware that you can help them if they ever encounter any of the situations described in the graph.
Conclusion
Conclusion
This financial crisis has created a tipping point for financial advisors. On one hand, by making the necessary adjustments as suggested in this report, a financial advisor has the opportunity to become the indispensible primary financial advisor for their affluent clients. This will strengthen the loyalty of these affluent clients, which by itself is statistically significant for acquiring new affluent clients. Loyal affluent clients are very willing to introduce and refer their primary financial advisor to family members, friends, and colleagues. On the other hand, this tipping point presents a tremendous opportunity for acquiring affluent clients of those advisors who arent making the requisite changes. The days of the one-dimensional financial advisor (sells investments, insurance, financial plans, etc.) are over. If history is any indicator, change is very difficult, and many financial advisors, for whatever reason, will not make the changes necessary to become the indispensible primary financial advisor for their affluent clients. And herein lies a prospecting gold mine for financial advisors who are willing to learn the fine art of selling their services to these dissatisfied affluent investors.
About The Oechsli Institute
About The Oechsli Institute

The Oechsli Institute, founded in 1978, specializes in helping the Financial Services Industry improve its ability to attract, service and develop loyal affluent clients. Their research based performance coaching and training programs have been become the standard within the industry. The Oechsli Institute does ongoing work for nearly every major financial services firm in the US. Matt Oechsli and his associates remain in high demand for keynote speeches and workshops. When not immersed in research projects, they spend most of the week traveling to national conferences, industry events, and other speaking engagements. Every program they conduct, every coaching session they hold, and every product they create are:
Research Based
The Oechsli Institute has conducted numerous research projects on the Affluent, Rainmakers, and Elite Financial Teams. This research is the foundation of every program; speaking volumes about what the affluent want, and how the elite financial advisors and teams meet and exceed their expectations.
Action Oriented
Each program conducted by The Oechsli Institute is driven by the principle, activity drives the dream. Why? Too many financial advisors get derailed by too much preparation. Oechsli Institute programs get you learning experientially!
Street Tested
The Oechsli Institute tests every facet of their approach to ensure their methods are working in todays environment. Every tactic we promote has been proven successful by many hard-working professionals.
Contributors
Matt Oechsli, MBA President, The Oechsli Institute Matt@Oechsli.com John Eatman, PhD Lead Statistician, The Oechsli Institute Stephen Boswell, MBA Director of Research, The Oechsli Institute Stephen.Boswell@Oechsli.com Kevin Nichols, MBA Director of Marketing, The Oechsli Institute Kevin.Nichols@Oechsli.com
The 2010 Affluent Investor Study was sponsored by Nationwide. Nationwide and its affiliates are not related to Oechsli Institute and any of its affiliates. NFM-8292AO (05/10).
www.oechsli.com 800.883.6582 info@oechsli.com
www.oechsli.com | 2010 The Oechsli Institute. All Rights Reserved. | For Broker/Dealer Use Only - Not For Use With The Public. ved

2010 Oechsli Institute - Affluent Research

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2010 Oechsli Institute - Affluent Research

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2010 Research Report

Affluent Investor Study

The Oechsli Institute

portant in-person interaction becomes.

significant dissatisfaction amongst todays affluent investors.

Very comprehensive planning approach to man- 25% aging our finances

About The Oechsli Institute

About The Oechsli Institute

www.oechsli.com 800.883.6582 info@oechsli.com

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