SOURCE: Sullivan

Sullivan

Sullivan

September 10, 2012 10:37 ET

New Study Shows Affluent Investors Becoming Wiser and More Resilient

Third Edition of "Rebuilding Investor Trust" Study, Co-Conducted by Northstar Research Partners and Sullivan, Finds Investors Are More Determined, More Involved and More Satisfied With Their Financial Advisors and Institutions

NEW YORK, NY--(Marketwire - Sep 10, 2012) - With the economy recovering more slowly than expected, and average household incomes still declining, American investors are nonetheless demonstrating resilience and expressing determination. In addition, even as they increasingly take responsibility for their investments' performance, investor satisfaction with their financial advisors and institutions continues to rise.

These findings come from the 2012 Rebuilding Investor Trust study, co-conducted by Northstar Research Partners, a leading research consultancy within the MDC Partners Network, and Sullivan, a brand engagement firm. The third edition of the study surveyed 1,800 individual investors with at least $100,000 in investable assets.

"Investors are delegating more, but delegation doesn't mean abdication. They are watching the economy and their portfolios carefully on their own, yet realize they need professional help," said Jim Neuwirth, President & CEO of Northstar Research Partners. "To be successful moving forward, advisors must recognize this shift and increase their client engagement accordingly."

"As in any relationship, communication is key. And for many investors, it is actually more important than portfolio performance," said Barbara Apple Sullivan, Managing Partner at Sullivan. "One of the most significant revelations from this year's study is that despite down markets and shifts in investors' overall financial situation, many vowed to stick with advisors if there was an open dialogue about their money management."

Investors Take the Wheel

The persistently down markets seem to be driving investors to take more accountability for their investments' performance and take greater responsibility for shaping their investing strategies.

  • When asked to describe how they felt about their financial situation, "determined" was the top response, with 91 percent choosing that term. Additionally, negative feelings like "disappointed" and "worried" continued to decline significantly;
  • Investors identified themselves as the most significant influence on their portfolio's performance more frequently than they did any other party;
  • Nearly half of respondents (and more than half of millionaires) stated they have a more positive outlook for their own portfolios over the next two years than they do for the economy overall;
  • However, investors are still delegating more to financial professionals, with 75 percent using an advisor (up from 64 percent in 2011) and fewer calling themselves "self-directed" (from 28 percent to 18 percent).

Adjusting to New Financial Realities

Continued economic uncertainty and mounting financial challenges are forcing affluent investors to adjust their lifestyles and realign their goals.

  • 57 percent indicated their portfolio values remain at or below the level where they were before the September 2008 crash;
  • The majority of households are expecting to work longer and retire later, with the average years to retirement rising slightly as they deal with declining incomes, lower home values, and greater family burdens (e.g., the percent of parents supporting an adult child rose from 26% to 35%);
  • Investors are now focusing more on long-term planning and portfolio protection: compared to 2011, ownership of life insurance and long-term care insurance is up, and more now say they have a comprehensive financial plan and estate plan in place.

Contentment Does Not Mean Commitment

There has been a substantial increase in trust and satisfaction for financial advisors and institutions over the past three years; however, measures of loyalty continue to lag behind.

  • 60 percent of investors are "very satisfied" with their financial advisors (up from 51 percent in 2011), and 65 percent are "very satisfied" with their financial institutions (up from 46 percent in 2011);
  • Over three-quarters of investors said they were not planning to move assets away from their primary advisor or institution;
  • Overall, women are significantly more satisfied with their advisor than men, while younger investors (ages 25 to 44) were the least satisfied;
  • Despite the increases in satisfaction, Net promoter score (a well-established metric for measuring likelihood to recommend) for advisors dropped significantly in the past year (from 25 percent to 15 percent);
  • When asked to characterize their advisor relationship in terms of romantic relationships 17 percent of investors said they were "acquaintances," 15 percent said they were still in the "dating" stage (despite working with their advisors for 7.5 years on average), and 65 percent described themselves as "committed and satisfied" with their advisor;
  • "Daters" were far more likely to hide assets from their primary advisor, concealing an average of 40 percent of their total wealth.

Investors Placing More Importance on Communication

The Study found that an advisor's ability to communicate effectively has become a key determinant in client retention.

  • As investors seek more control over their investments, 58 percent of them have been communicating more frequently with their advisors in the last year;
  • Study respondents reported that they were just as likely to have fired an advisor for poor communication as for poor performance;
  • While 35 percent had forgiven an advisor for a poor investment choice, only 16 percent had forgiven insufficient or ineffective communications.

Communicating in the Digital Age

Even though technology and social media now offer advisors a myriad of channels for communicating with their clients, investors continue to prefer more traditional methods of interaction.

  • Half of investors are not at all interested in using social media for financial matters, although younger investors are predictably more open-minded about it;
  • Only 11 percent of all investors have any interaction with their advisors via social media;
  • When it comes to receiving news about their portfolio, investors across the board said they prefer phone calls to emails, underscoring the continued importance of personal interaction in today's digital age.

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STUDY METHODOLOGY

The Rebuilding Investor Trust study was fielded in April and May 2012 among a sample of 1,800 investors with at least $100,000 in investable assets outside workplace retirement plans.

  • Men and women age 25 and over, ranging from Millennials to Baby Boomers and retirees
  • Geographic distribution across the U.S.
  • 15 percent of respondents with over $1 million in investable assets
  • Clients of full-service brokerage firms, independent broker/dealers, financial planning firms, discount brokers, mutual fund companies, insurance firms, and banks
  • Two-thirds of respondents working with a financial advisor

The full study, including detailed recommendations for financial marketers, is available for purchase. For more information, please visit http://rebuildinginvestortrust.com.

ABOUT NORTHSTAR RESEARCH PARTNERS

Northstar, a member of the MDC Partners Network, is a leading global full-service market research and consulting firm, offering qualitative and quantitative studies plus consumer anthropology, with services across both consumer and business-to-business channels. Northstar has been the recipient of numerous awards, including the prestigious Grand Ogilvy and Gold Prize at the 2011 Ogilvy Awards for the Domino's Pizza: Pizza Turnaround campaign.
For more information, please visit nsresearch.com.

ABOUT SULLIVAN

Sullivan is a brand engagement firm that connects customers to brands at the very moments they are likely to make decisions. The firm's capabilities span all aspects of strategy, design, and delivery, across traditional and digital media. Sullivan boasts relationships with many blue-chip for-profit and not-for-profit clients, including American Express, Charles Schwab, Duke University, LinkedIn, Stanford University Graduate School of Business, and WebMD. In 2012, Sullivan was named top agency of the year by BtoB Magazine. For more information, please visit sullivannyc.com.

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