Fourth annual Advisor Authority Study highlights unique needs of HNW, To Help RIAs and Fee-Based Advisors Unlock Greater GrowthSpecial report reveals more than 1/4 of HNW and Ultra HNW Investors do not have advisors, uncovers key factors to drive client satisfaction and advisor success
Louisville, KY—December 3, 2018—A new Special Report from the fourth annual Advisor Authority Study commissioned by Nationwide Advisory Solutions, formerly known as Jefferson National, zeros in on the thriving market of more affluent investors, including the High Net Worth (HNW). HNW is defined as individuals who have investable financial assets ranging from $1 million to less than $5 million, and the Ultra High Net Worth (Ultra HNW), individuals who have investable financial assets of $5 million or more. These latest findings profile the unique needs of the HNW—and how their needs change as they ascend to the ranks of Ultra HNW. RIAs and fee-based advisors can tap into these insights to unlock greater growth. Conducted online by The Harris Poll, the study surveyed roughly 1,700 financial advisors and individual investors nationwide.
“Year-over-year, RIAs and fee-based advisors say that adding new clients is the number-one driver of profitability, and the HNW and Ultra HNW are an ideal target, as their numbers are growing and their wealth is increasing. But they have unique needs—and face unique risks—that advisors must understand in order to build trusted relationships,” said Craig Hawley, Head of Nationwide Advisory Solutions. “Uncovering the key factors to satisfy this valuable client segment of more affluent investors, our latest Advisor Authority Special Report can help RIAs and fee-based advisors drive greater growth—and greater success.”
The opportunity is substantial. Driven by robust equity returns, brisk economic performance and rising investor confidence, in 2017 HNW and Ultra HNW investors in the U.S. saw their total wealth increase 10.5 percent to $18.6 trillion and the number of HNW and Ultra HNW investors increased 10 percent to 5.3 million individuals. The U.S. continues to be home to the largest number of HNW and Ultra HNW investors holding the greatest amount of wealth in the world.[i]
Yet more than one-fourth of these more affluent investors do not have a financial advisor (29% HNW and 26% Ultra HNW) according to this latest Advisor Authority Special Report. “Winning the High Net Worth: Unlock Greater Growth Serving More Affluent Investors” helps RIAs and fee-based advisors understand this valuable client segment and compete more effectively for their business.
Top Priorities to Attract and Retain the HNW
To effectively attract and retain the HNW, advisors must align with their top priorities. Year-over-year, more affluent investors say that the single most important reason for having a financial advisor is to feel more confident in their financial future, rating it number-one by a wide margin (39% HNW and 38% Ultra HNW) in this year’s study.
Drilling deeper on the main reasons why more affluent investors have a financial advisor reveals the unique needs of their complex financial lives. Whereas the typical investor is more likely to seek advice about saving enough for retirement (16%), the HNW are somewhat more likely to seek advice because financial planning is a focus (15%) but they lack confidence in managing their own assets (11%) and they lack the time to manage their own finances (11%). The Ultra HNW are more likely than the typical investor to seek advice for leaving a financial legacy (12%) and for help managing their taxes (9%).
Additionally, year-over-year, more affluent investors say that the top three factors which influenced their decision for choosing their advisor include advisor experience (50% HNW and 38% Ultra HNW), personalized advice for a holistic financial picture (31% HNW and 20% Ultra HNW), and a fiduciary standard that puts clients’ best interest first (29% HNW and 24% Ultra HNW). In fact, this year’s study shows that these more affluent investors are more likely to believe there should be one federal fiduciary standard across the financial industry (74% HNW and 80% Ultra HNW vs 68% All Investors). This year’s study also shows that technology matters to the Ultra HNW, who are more likely to cite increased use of social media (18%), mobile technology (16%) and robo advisors (12%) as factors for choosing an advisor.
Address Top Concerns to Create Confidence
Having substantially more wealth does not always translate into a more optimistic financial outlook. When asked their financial outlook for 2018, the HNW are only somewhat more optimistic (65%)—while the Ultra HNW are somewhat less optimistic (58%)—compared to all investors (62%).
More wealth means affluent investors have more to lose. Protecting assets is a top concern for investors at every level in 2018, and especially for the HNW. Year-over-year they say this is their number-one concern by a wide margin (45% in 2018, 41% in 2017 and 41% in 2016). This year, taxes rose to the number-one concern for the Ultra HNW (42% in 2018, from 29% in 2017 and 32% in 2016), while protecting assets was their top concern in prior years (40% in 2017 and 33% in 2016). Whereas the typical investor is more concerned about saving for retirement (21%) and managing debt (19%), the more affluent investors have greater concerns about managing volatility (28% HNW and 22% Ultra HNW) and transferring wealth to heirs (13% HNW and 10% Ultra HNW).
Given their greater focus on protecting assets, more affluent investors are far more likely to have a proactive strategy against market risk (79% HNW and 76% Ultra HNW vs 57% All Investors). While investors at every level rely most commonly on diversification, liquid alternatives and fixed annuities to manage market risk, the Ultra HNW are far more likely to also use fixed index annuities (39% vs 11% HNW and 22% All Investors), market-linked CDs (37% vs 16% HNW and 20% All Investors), and smart beta ETFs (31% vs 6% HNW and 7% All Investors).
Lawmakers at home and abroad continue to dominate the headlines—and remain top of mind for more affluent investors. Asked which macro factors will most adversely impact their portfolios in 2018, the HNW are far more likely to say that gridlock in Washington (26%) and global instability (25%) are the top two concerns, while the Ultra HNW say that taxes (21%) and rising interest rates (21%) are tied for number-one.
Tax Planning & Tax Efficient Investing
This year’s study also shows that a focus on tax planning and tax-efficient investing could help build more wealth for more affluent clients—and drive more growth for RIAs and fee-based advisors. The Ultra HNW are far more likely to say that they will benefit from tax reform (74% Ultra HNW vs 56% HNW and 56% All Investors). Likewise they are far more likely to say that tax reform will increase the likelihood that they will work with an advisor over the next 12 months (47% Ultra HNW vs 22% HNW and 28% All Investors).
To learn more about the unique needs of these more affluent investors, financial professionals can download the Advisor Authority 2018 Special Report, “Winning the High Net Worth: Unlock Greater Growth Serving More Affluent Investors.”
For additional insights on more affluent investors, financial professionals can also download the latest Advisor Authority 2018 infographic at: http://know.nationwideadvisory.com/2018AdvisorAuthority/Ch3/Infogram
The fourth annual Advisor Authority study explores the investing and advising issues confronting RIAs, fee-based advisors and investors—and the innovative techniques that they need to succeed in today’s complex market. It features a special focus on the most successful advisors and the most affluent investors. This is the third in a series of ongoing Special Reports that will be released through first quarter 2019.
About Advisor Authority: Methodology
The fourth annual Advisory Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide Advisory Solutions from January 3 – February 21, 2018 among 972 financial advisors and 827 investors, ages 18+. Among the 972 financial advisors, there were 508 Registered Investment Advisors and 464 Broker/Dealers. Included in this group of financial advisors is a new segment of 212 Wirehouse Broker/Dealers that is excluded from trended data to allow for year-over-year comparisons. Among the 827 investors, there were 208 Mass Affluent, 206 Emerging High Net Worth, 208 High Net Worth and 205 Ultra High Net Worth. Results of this new research are compared to results from a similar 2017 and 2016 study conducted online by The Harris Poll on behalf of Nationwide Advisory Solutions. Detailed methodologies from these studies are available upon request.
Investors are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, household size, investable assets and propensity to be online to bring them in line with their actual proportions in the population.
About The Harris Poll
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.
About Nationwide Advisory Solutions
Nationwide Advisory Solutions, formerly known as Jefferson National, is a recognized innovator with a mission to help RIAs and fee-based advisors build their practice by helping their clients to potentially accumulate more wealth and reach their financial goals. Nationwide Advisory Solutions does this by developing and delivering value-added investment products, services and technologies that fit the fiduciary standard—wrapped in an industry-leading customer experience. To learn more, please visit www.nationwideadvisory.com
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s. The company provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com.
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