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Rich Investors Blame Advisers

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Oct 4, 2008 2:24 pm

Even the WSJ has noticed that a lot of the higher net clients are moving around.  This article details just how upset a lot of people are and how they are starting to pull assets from their advisers.  Just confirmation to what a lot of you have already said is going.  I would have put up a link but apparently marketwatch lets you read the whole article while WSJ wants you to register.

"Rich Investors Blame Advisers"

With investors getting clobbered by financial markets, it isn’t a surprise they are blaming their financial advisers.

But the wealthy aren't just getting mad, they are getting even, pulling their money and moving it to different firms.

According to a survey from Prince & Associates, 81% of investors with $1 million or more in investible assets plan to take money away from their current adviser. An even larger number, 86%, plan to tell other investors to avoid their adviser.

Only 2% plan to recommend their firm to other investors. That is of critical importance, since wealthy investors often get investment advice from one another.

The irritation is especially high at "brand" firms. Fully 90% of clients of these large brokerages and banks plan to take money away from their adviser and 70% plan to leave the adviser altogether.

That compares with a mere 29% for the boutique, local advisory firms.

So what does this mean for investors and wealth-management firms? It could just mean a reshuffling of assets between branded firms, with big clients moving money from Merrill Lynch to U.S. Trust, or Lehman Brothers Holdings to Goldman Sachs Group.

Or, more likely, it could accelerate the broader move away from big-name advisers to smaller shops with fewer conflicts, lower turnover and more personalized service.

Wealth-management firms argue it isn't their fault, that they are victims of the same extreme and unforeseeable market conditions that have wrecked even the most sophisticated managers.

And blaming your wealth manager for a 770-point drop in the Dow industrials is pointless.

Yet, it isn't just the performance that has irritated wealthy investors. Of those clients whose investment returns this year were up against pre-determined benchmarks, fully half planned to take money away from their adviser.

In other words, bad service can't overcome good numbers.

—Robert Frank, The Wealth Report

Oct 4, 2008 4:47 pm

I believe it.  I was in a meeting with another indy advisor.  He said so far he’s brought in $35MM YTD and that the wirehouse account are running to him.

Oct 4, 2008 6:21 pm

$35MM YTD?!?!?!?!  HOLY   !!!

  Yeah, he's a $2MM producer, so I'm sure he's reeling in the referrals.  Does a lot of annuity business I think.
Oct 4, 2008 7:20 pm

I doubt any survey that say 90% of any group are doing anything, much less the idea that $1M and above investors are leaving their advisors at that rate. If you want to believe 90% of wirehouse bread and butter clients, the million and above, are taking money away, good luck.

Oct 5, 2008 2:43 pm

I don’t think the numbers are THAT high, but I did find it an interesting article.  Great reason to get on the phones or out in front of people to prospect.  The numbers may be skewed based on a particular demographic, but it still supports there are a lot of upset investors out there looking for a new FA.

Oct 5, 2008 10:57 pm

I can almost guaranteee that Robert Frank (the writer of the article) has a vested interest in some channel OTHER than wirehouses (if for no other reason than a personal vendetta). Those numbers just can’t be accurate. How can 90% of large brokerage clients plan to take SOME assets to another advisor, and 70% take ALL of it?? That is just ludicrous. That means a wirehouse advisor with $100mm AUM stands to lose 70mm+ ??! C’mon. I’ would be interested to see how those questions were worded. Statistics can be twisted to say whatever you want…

Oct 5, 2008 11:15 pm

Don't let these generalized stats ruin your week. I remember reading that most 1m + clients have multiple advisors. Not at all the case with mine. If you are providing comprehensive advice and have a tight relationship, the only worry is declining revenues as AUM temporarily dips. But I do enjoy working with the mass affluent (100k-1m).

Oct 6, 2008 3:04 am

[quote=B24]Those numbers just can’t be accurate. How can 90% of large brokerage clients plan to take SOME assets to another advisor, and 70% take ALL of it?? That is just ludicrous. .[/quote]

I agree.  The statistics are ridiculously high.  I am curious as to how it was “phrased” initially.  Either way, there is more than likely a large portion of individuals wondering what’s going on.  Those on this board are not frozen like some advisors.  The board acts as a form of support for when it got/is getting tough.  I read an article about the frozen advisors losing A LOT of their clients because they are doing nothing.  Do the opposite and you will find yourself some great accounts.  I put this up mostly to try to keep people from getting “frozen” or falling into shock.