Many Wealthy Unhappy With Their Financial Advisors

[jeffrey]

According to a new MyWay Investment Advisors (MWIA - an independent financial planning and investment advisory firm) survey, 98% of respondents would change the way they work with their advisor with 43% saying they wanted to change the amount they paid for the financial advice and services. This compares to only 13% of advisors who would look to improve how they currently operate, including pricing for clients.. The survey focused on how individuals would like to be treated by their financial advisor or investment professional and how they would like to pay for those services.

The survey targeted the individuals with annual incomes greater than $75,000 and $150,000 to $600,000 in invested assets, including 401Ks. A duplicate survey was sent to financial planners, investment managers, insurance sales people and other financial industry professionals to compare responses.




When asked how they would like to pay for financial advisor services, 44% wanted to pay a flat dollar amount that was known upfront. 36% indicated they would prefer to pay a percent of their assets which also included all brokerage fees while 18% said they'd like to pay a percent of their assets and would also be willing to pay brokerage fees on top. Nobody wanted to pay a financial advisor on commission

When it comes to financial advice, however, financial advisors isn't where most of those surveyed go for information. Only 27% utilize financial advisors while over half (56%) get advice from a friend, publications or on their own.

Of those that have a financial advisor, only 18% are happy with him or her. a whopping 56% say they are dissatisfied and 23% still have not made a decision.

The negative view of financial advisors likely comes from the results they have provided. two-thirds say the advice they received from their financial advisors returned less than the S&P 500 while only 22% beat this benchmark

Some other interesting facts from the survey:

• Not a single respondent could answer exactly what they paid for a fee in 2005 as a dollar amount.
• Not a single respondent knew what their advisor was paid as a dollar amount based on their investment management business.
• A mere 17% of respondents knew if they were working with a broker or a financial advisor (or both) and what the differences between the two are.
• Less than one quarter (18%) knew commissions or compensation was paid to advisors for Variable and Fixed annuities and Certificates of Deposits.

[Ima saver]

I think you can do just as well on your own.

[kristinecfp]

Great info! I had a couple of thoughts while reading this thread. First, re: "44% wanted to pay a flat dollar amount that was known upfront", there are many fee-only financial planners who offer their services either by the hour, or by the project, and clients know how much the services will cost up front. To find these financial advisors, do an internet search for fee-only financial planner, or fee-only financial planning.

Second, re: "The negative view of financial advisors likely comes from the results they have provided. two-thirds say the advice they received from their financial advisors returned less than the S&P 500 while only 22% beat this benchmark." - There is much, much more to financial planning than just investment advice. Most of my clients come to me (I am an hourly, fee-only financial planner) to see if they are saving enough to retire at a certain age, to see if they have the right asset allocation for their age/time frame/goals, to minimize income taxes, or to learn how much they need to save for their childrens college education. In fact, I have never had a client come to me asking for help improving their investment returns. Given that the scope of financial planning is so much greater than investment returns, I think you should consider how your financial planner has helped you reach your financial goals instead of just looking at investment returns.

[Lostsoul33]

I agree with Ima. If you just do a bit of research, you can do this on your own. We had a financial advisor that we loved. He retired and a young girl took over his position. She doesn't portray a lot of confidence and her answers weren't always clear so it was difficult to deal with her. Finally we just dropped her and agreed to do our own thing.

[vips]

Financial advisor should be well qualified and experienced person who is able to make financial decisions with proper planning. He should have to try to monitor all financial investment to maximize money within specific risk boundaries. If we get such financial advisor then no-one will be unhappy with him.

[kv968]

Originally Posted by jeffrey

When asked how they would like to pay for financial advisor services, 44% wanted to pay a flat dollar amount that was known upfront. 36% indicated they would prefer to pay a percent of their assets which also included all brokerage fees while 18% said they'd like to pay a percent of their assets and would also be willing to pay brokerage fees on top. Nobody wanted to pay a financial advisor on commission


Some other interesting facts from the survey:

• Not a single respondent could answer exactly what they paid for a fee in 2005 as a dollar amount.
• Not a single respondent knew what their advisor was paid as a dollar amount based on their investment management business.
• A mere 17% of respondents knew if they were working with a broker or a financial advisor (or both) and what the differences between the two are.
• Less than one quarter (18%) knew commissions or compensation was paid to advisors for Variable and Fixed annuities and Certificates of Deposits.

Although 44% said they would rather pay a "flat dollar amount that was known up front" I would bet that actually almost NONE of them would want to pay that fee. My thinking is derived from the "other interesting facts" in that "not a single respondent could answer exactly what they paid".

I look at it this way...if someone was paying an advisor 1.5% on a $100k portfolio that the financial advisor was managing they'd be paying $1500/yr without ever really seeing it. Kind of like an expense ratio of a mutual fund.

However have that same advisor wave that 1.5% fee and instead charge the same $1500 at the beginning of the year and I bet almost everyone wouldn't want to write that check because they would actually see it and feel it all at once.

It's kind of like people paying the mimimum on a CC. Sure it may take them years and thousands of dollars in interest to pay off their initial amount but they never actually SEE the 17% or so interest they're paying so it's ok to them.