One of the reasons many investors never find an advisor or seek wealth management is because they believe that wealth management is too expensive for the services they need. In fact, according to research conducted by Spectrem Group with investors with $100,000 to $25 million of net worth (not including the value of their primary residence), a quarter of investors believe that wealth management is too expensive. Forty percent of investors are somewhat neutral regarding this idea, and just over a third of investors are open to engaging in wealth management.
Attitudes regarding whether wealth management is too expensive varies somewhat based upon demographics. Retired investors are more likely to believe that they can afford wealth management with 39 percent willing to pay for wealth management services, compared to only 30 percent of working investors. Age also has a significant impact on an investor’s feelings regarding if they can afford wealth management. Baby Boomers are the most likely to believe that they can afford wealth management at 39 percent, while only 32 percent of Gen Xers feel wealth management is worth the cost. Note that just over a third of Gen Xers believe that wealth management is too expensive for the services they might need. Only 36% of WWII investors believe that wealth management is worth the cost, however, over half are neutral and only 14 percent believe it is too expensive.
In addition to the perception of being worth the cost, investors also have defined opinions as to what level of wealth is required in order to qualify for wealth management services. Twenty-two percent of investors believe wealth management is appropriate for someone with $100,000 and 26 percent believe you need at least $500,000. Only a quarter of investors believe a household must have over $1 million to qualify for wealth management.
What are investors choosing to do if they are not working with an advisor? Many investors believe they can invest directly in mutual funds or other investments and achieve the same rates of return as financial advisors. In the past few years, markets have generally been positive, so the value of investment management has not been appreciated. With the volatile and declining trend of the financial markets right now investors may be more willing to consider working with a financial professional. Investors also typically begin to appreciate the importance of wealth management when they have children, need to pay for college, or when they enter retirement. At any of these key financial points of their lives, they may be more open to the concept of wealth management.
Many financial professionals indicate that they are the most valuable during volatile or down markets, which is what the market has been recently; revealing an opportunity for many investors to consider hiring a financial advisor, or consider working with their current advisor and start financial planning or wealth management.
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