Uncertain Investors are Ready to Leave Their Financial Advisors, According to a New Study by Northstar Research and Sullivan

NEW YORK, April 20, 2011 /PRNewswire/ -- Despite higher levels of trust in their financial firms and advisors, today's affluent investors also express uncertainty and a greater willingness to take their assets elsewhere, according to a recent study.

The Rebuilding Investor Trust study is a comprehensive market research study conducted by Northstar Research Partners, an MDC Partners Network Company (NASDAQ: MDCA) (TSE:MDZ.A), in conjunction with Sullivan, a leading communications strategy and design firm.

In this year's study, affluent investors say their levels of trust have risen significantly since 2009, across institutions in general and even more so for the specific firms and advisors they currently do business with.

Of the affluent investors who were sampled for the study, nearly two-thirds (64 percent) currently work with a financial advisor.  Two-fifths of investors (43 percent) say they're "very satisfied" with their primary financial institution (double since 2009) and 51 percent of those with advisors claim to be "very satisfied" with their advisor.

However, trust and satisfaction don't necessarily translate to loyalty.  More than a third (36 percent) now say they will consider moving assets away from their primary institution and 25 percent say they will consider moving assets away from their advisor in the next year, a significant increase compared to 2009.  Of those currently without an advisor, one-quarter (25 percent) plan to seek professional investment advice within the year.

"Investors are more forgiving and evince far greater trust in their advisors and institutions than in 2009," according to Jim Neuwirth, president of Northstar Research Partners.  "The anger, disappointment and sense of betrayal that many investors felt in 2009 have greatly dissipated.  Investors are still fearful they won't meet their financial goals but are no longer afraid to take more control and make changes." 

"Looking ahead, we see our findings as a wake-up call for institutions but also a great acquisition opportunity, as investors are more open to other providers who can show them a more compelling roadmap for success," explains Barbara Sullivan, managing partner of Sullivan.  "This means institutions and advisors should take a more active approach to engaging their clients and prospects with transparent language and personalized service."

The Rebuilding Investor Trust study is conducted to help financial services companies better understand the mindset of today's affluent investors.  Some additional points about the key findings:

Money Walks - More than a third of respondents (36 percent) said they are willing to move assets from their current institution in the coming year. Younger investors, women, and those with assets in the $250K-$500K range may be particularly likely as they are less than impressed with their firms' service.  Of those who would consider moving, they were most likely to be seeking "better investment performance."

Defense: A Serious Offense? - Despite their concern about reaching long-term goals, investors may have lost sight of the need for achieving growth in their portfolios.  While in 2008 only 22 percent of investors identified themselves as conservative, in 2011 this proportion is nearly doubled (41 percent).  Over half (58 percent) say they are more focused on protecting principal (47 percent) while only 39 percent are focused on long-term growth.  Less than a third (29 percent) are focused on short-term gains.  Investors under age 45 have 42 percent of their portfolios in cash or cash equivalents, such as CDs, savings accounts or money market accounts.  "Investors have not substantially increased their appetite for risk compared with 2009 figures and continue to be dramatically more risk-averse than prior to the pre-market downturn," Neuwirth explains.

Keep in Touch - On the other hand, trust in one's financial advisor has jumped from 61 percent in 2009 to 74 percent in 2011.  Sixty-four percent trust personal communications from their advisor, more than three times more than any other source of information.  As one might expect, trust in advisors increases with frequency of contact.  Only a quarter (24 percent) of investors who have contact once per year or less are "very satisfied" with their advisor, while two-thirds (63 percent) of those with more frequent contact are "very satisfied."

Elusive Financial Goals - The study reports that affluent investors aren't confident about meeting their financial and retirement goals either.  Only one fifth (19% overall) are "very confident."  Among those not very confident, 84 percent say that they're uncertain about where things are going. Of investors who are not confident about achieving their financial goals, most (90 percent) say their greatest concern is retiring comfortably, two-thirds (68 percent) say they're worried about maintaining a comfortable lifestyle, more than half (57 percent) are concerned about leaving a legacy, and 37 percent are concerned about funding a child's education.

Planning Ahead - Investors, particularly those who use banks as primary financial institutions, indicate a significant hunger for long-term planning products such as estate plans, long-term care insurance and comprehensive financial planning. "In light of this, the recent regulatory expansion of estate tax exemptions offers a great conversation-starter for firms and advisors," Neuwirth states.

"Conversations and communications with investors need to reflect the new investor mindset that addresses this need for change," Barbara Sullivan concludes.  "Language that conveys security, transparency, and a long-term, personalized approach garners the most positive reaction among those polled. Financial services firms need to reevaluate how to appeal to investors who are feeling uncertain, less confident, and more risk-averse."

Study Methodology

The study sampled 1,290 individuals with affluent households ($100K+ investable assets, excluding real estate and workplace retirement plans) -- including 15% with investable assets in excess of $1 million.  The data is weighted to reflect the U.S. population of $100K+ investors, based on the 2007 Survey of Consumer Finance.  The study has a margin of error of +/- 2.5 percent.

Rebuilding Investor Trust details specific action steps required by an institution to rebuild trust with its customer base.  For more details, or to purchase the complete study, please email Suzanne Leff at [email protected].

About Sullivan Founded in 1990, Sullivan is a brand engagement firm that transforms complex products and services into communications that clarify and inspire action at every point of decision.

sullivannyc.com

About Northstar Research Partners Northstar Research Partners (a member of the MDC Partners Network) is a leading international full-service market research consultancy, offering a fresh approach to qualitative and quantitative research across the consumer and business-to-business realms.  nsresearch.com

SOURCE Northstar Research Partners