Medical Practice Management, Physician Financial Management Services
May 13

High Net Worth Survey: More Pessimism, Fewer Advisors

The number of high-net-worth (HNW) Americans functioning without a financial advisor has risen to 41%, a record high finding for the just-released Phoenix Wealth Survey.  As pessimism over the U.S. economy has increased, more high net worth individuals are taking a do-it-yourself approach to their finances rather than hire an advisor.

The survey, now it its ninth year, found that just 36% of HNW individuals were optimistic about the prospects for U.S. economy over the next year or two, down from 51% in 2007. With 50% of respondents stating they were pessimistic about the U.S. economy—the highest level of pessimism ever recorded by the survey, exceeding the 21% expressed back in 2001.

"This is really the first time we’ve seen such a dramatic change in one year," said Walter Zultowski, Ph.D., senior vice president of Research and Concept Development for Phoenix. Traditionally, the HNW market is seen as an early indicator for economic health. High-net-worth individuals, as a group, more easily withstand the ups and downs of the economy, which makes the survey’s finding all the most alarming.

However, those hoping to target the HNW crowd during this period of market strife may need to re-think their plans. For one, high net worth individuals are not turning to financial advisors. Those who are using an advisor are now analyzing that relationship much more critically, the survey found.

The 41% of respondents who reported they do not have a primary financial advisor is up from 34% last year. This statistic has hovered around the 33% range since the survey began, according to Zultowski.

Of the HNW individuals looking for a new advisor, there was a noticeable spike of complaints associated with advisor financial advice and investment fees in this year’s survey, Zultowski notes.

"When times are tight, high-net-worth individuals tend to review the advisory relationship from a cost/benefit point of view," said Zultowski. So even when the advisor is doing the "right" things—rebalancing, reallocation—clients can still loose money in a down market. "It may not be the advisor’s fault but they still get the blame for it," said Zultowski.

The survey did have some encouraging results when it comes to areas for growth for advisors. About 22% of the HNW group reported they had delayed or put off estate planning. That figure rose to 42% for individuals worth $3 million or more.

The Phoenix Wealth Survey defined high net worth individuals as those with $1 million or more in net worth, not including primary residences.

MORAL OF THE STORY:  TO HELP MAKE YOUR ANNUAL NET WORTH GROW, GET A FINANCIAL ADVISOR TO HELP!!

About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read more →