Millennial Clients Can Be Picky Advice Shoppers

A research study from Spectrem Group finds wealthy investors “most often fire advisers for a lack of proactive ideas, while less wealthy investors fire advisers for a lack of frequent contact.”

Beyond this theme, however, Spectrem says the reasons behind a decision to fire an adviser vary greatly depending on factors such as age, net worth and investing objectives. The study, “Why Investors Switch Advisors,” reveals more than half of high net worth investors switched financial advice providers within their lifetime. Nearly a quarter switched in the last five years.

Unsurprisingly, Millennials are more likely than the older generations in the workforce to believe an adviser should provide information and services through mobile technology. Advisers should also “understand social media,” according to younger investors, but limits prescribed by the Securities and Exchange Commission continue to hold advisers back from fully leveraging the potentially promising communication channel.

It’s a big enough issue that the SEC issued a series of investor bulletins in the last several years, warning of the risks of social media fraud. At the same time, social media is undeniably joining traditional financial news media as a key source of information used by investors, both individual and institutional.

It makes sense, Spectrem says, that investors who are more involved with their portfolios and enjoy investing are more likely to switch advisers than those who don’t have the time or interest to be deeply involved with their investment portfolios. The former group is looking for advisers “who stay in contact with them in addition to offering new investment ideas and forward thinking,” Spectrem says.

Other recent research from Spectrem Group finds a majority of investors are critical of the communication tools advisers rely on to build relationships. Notably, Spectrem finds less than 60% of investors consider any of the communication tools used by investment providers and advisers to be of “excellent” quality. 

“The communication tools in question include account statements, face-to-face meetings with advisers, the [written] financial plan, access to the firm’s management or experts, newsletters and blogs,” Spectrem Group explains. “An ‘excellent’ rating was hard to come by.”

In fact, only 58% of investors with a net worth between $100,000 and $1 million say their account statements and other communications are “excellent.” Those investors with more than a million dollars displayed nearly the same level of satisfaction, suggesting some advisers who have won these coveted clients aren’t exactly delivering stellar service.

More than half (54%) of investors with more than $100,000 saved said that current face-to-face meetings with advisers were “excellent,” and just slightly more (55%) millionaires reported the same. “All other communication tools dropped below 50% excellent,” Spectrem notes.

“In regards to the written word, newsletters were deemed ‘excellent’ by only one-quarter of investors,” the research shows. “Even worse were blogs, with only 10% of blogs being deemed 'excellent' by mass affluent investors and only 9% deemed ‘excellent’ by millionaire investors.”

While excellence in communication is lacking, Spectrem also shares some encouraging results. Researchers find very few investors rated adviser communication tools outright poorly, “with overall percentages always ranging around 5% or below.” Newsletters seem to be favored somewhat more by older investors, while blogs are not well received among the group.