Those without advisors will continue to shun advisory services creating new growth challenges for financial firms
NEW YORK, Dec. 10, 2009 — Despite the market declines that high net worth investors suffered since 2008, those that have financial advisors will continue to heed their advice even more closely, while those that do not have no plans to tap financial advisory expertise in the future, a new study reveals.
According to the “Northstar/Sullivan Rebuilding Investor Trust Survey,” which queried 1,539 individual high net worth investors, the financial services industry now faces a highly distrustful and disillusioned affluent investor base as a result of the precipitous 2008 market drop.
Nevertheless, these same investors are more likely to feel hopeful and optimistic about the future than worried or stressed, though they are becoming more conservative and risk adverse across the board.
Among the key findings of the Northstar/Sullivan Study:
- Importance of Primary Advisory Relationships: Nine in 10 (89 percent) who had an advisor when the market downturn started are still working with that same advisor (with 20 percent who say they are relying on their advisor even more than before). Additionally, close to two-thirds of respondents (61 percent) report a high level of trust in their primary financial advisor; this compares with just 10 percent of respondents who say they highly trust financial advisors or financial institutions in general.
- Wall Street Betrayal: Even a year after the market meltdown, nearly four-fifths (79 percent) pin most of the blame on “big Wall Street firms,” with a similar number (76 percent) claiming that, “Wall Street hasn’t learned its lesson” and two-thirds (65 percent) stating that individual investors are really the victims of Wall Street. The vast majority of respondents favor greater oversight of financial institutions, as well as additional oversight of financial advisors.
- Whom Do You Trust?: Only a quarter of households (27 percent) say trust in their advisor has declined since before September 2008. Far higher percentages of affluent investors, however, have lost trust in financial institutions, the financial markets, the media and the government.
- Concern Meeting Financial Goals: There has been a staggering five-fold increase in the number of affluent investors who are NOT confident in their ability to meet financial goals: 25 percent today vs. just five percent a year ago. There has also been a startling 75 percent decline in the percentage of households who are very confident about their ability to achieve their financial goals: 14 percent today vs. 54 percent prior to the market downturn.
- Risk Adversity Has Skyrocketed Despite Market Surge: According to the Northstar/Sullivan Survey, tolerance for risk has markedly decreased in all age groups; most notably in the 25-45 year bracket, the segment with the most time to recover. Overall, 54 percent classify themselves as conservative investors, compared to just 22 percent a year earlier.
“Going forward, in this environment, the cost of new customer acquisition is likely to be higher; what this study clearly shows is that the best opportunities for financial services companies are in cultivating their existing client base,” according to Jim Neuwirth, Managing Director of Northstar Research Partners, which studies the financial services industry. “In our survey, these investors speak loud and clear regarding the steps they feel will restore their confidence and that has significant marketing implications.”
Rebuilding Investor Trust is a syndicated marketing research study conducted by Northstar Research Partners in conjunction with Sullivan, a leading communications strategy and design firm, and Dr. Val Srinivas, an industry expert and the study director. The results are based on 1,539 online surveys with affluent households ($100K+ investable assets, excluding real estate and workplace retirement plans) — including more then 200 individuals with investable assets in excess of $1 million. The Survey 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. To purchase the full study or learn more about this landmark research, please contact Jim Neuwirth, managing director, Northstar Research Partners at 212-986-4077 x225 or jneuwirth@nsresearch-usa.com
About Northstar Research Partners
Founded in 1998, Northstar Research Partners is a leading market research consultancy with offices in Toronto, London, New York, Los Angeles, Boston and Detroit. Employing a multi-disciplined team of consultants equipped with not only best-in-class research skills but also the latest concepts in marketing theory and brand development, Northstar designs, executes and delivers customized and compelling market research for its clients around the globe. http://www.nsresearch.com
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