The affluent investor

Transcription

1 The affluent investor Insights and opportunities for advisors

2 Agenda Who are the affluent? What s on their minds? What do they expect from an advisor? How do they want to communicate? 2

3 Who are the affluent? 3

4 Who are the affluent? Demographic snapshot Mass affluent (MA) Millionaire (M) Ultra-high-net-worth (UHNW) Net worth* $100K $1M $1M $5M $5M $25M Population (estimated households) million 8.39 million 1.11 million Using an advisor 68% 81% 81% Tenure with advisor 3 10 years: 38% 10+ years: 38% 3 10 years: 38% 10+ years: 41% 3 10 years: 35% 10+ years: 49% Average age 59 years 63 years 65.5 years Retired 39% 57% 59% * Not including primary residence. 4

5 Who are the affluent? Total assets Percentage of investable assets increases with wealth MA M UHNW 38% Investable assets 12% Defined contribution 31% Principal residence 5% Investment real estate 11% Insurance and annuities 3% Restricted stock 55% Investable assets 11% Defined contribution 16% Principal residence 7% Investment real estate 9% Insurance and annuities 2% Restricted stock 68% Investable assets 6% Defined contribution 9% Principal residence 7% Investment real estate 5% Insurance and annuities 5% Restricted stock 5

6 Who are the affluent? Investable assets Less in cash, more in equities as wealth increases MA M UHNW 38% Investable assets 55% Investable assets 68% Investable assets 13% Fixed income 37% Equities 4% Alternative investments 25% Cash and liquid assets 21% Other/unknown 18% Fixed income 49% Equities 3% Alternative investments 15% Cash and liquid assets 15% Other/unknown 21% Fixed income 59% Equities 2% Alternative investments 13% Cash and liquid assets 5% Other/unknown 6

7 Who are the affluent? Control of assets Investors control roughly half of all assets themselves MA M UHNW Assets I control myself with no professional help 60% 55% 49% 46% 49% 40% 59% 46% 48% Assets I consult with an advisor on, but make decisions myself 26% 30% 36% 38% 33% 38% 26% 38% 33% Assets I allow an advisor to handle for me 14% 15% 15% 15% 18% 22% 15% 16% 18% 7

8 Who are the affluent? Advisor dependency Opportunities for new business with self-directed investors MA M UHNW Self-directed I make my own investment decisions without the assistance of an investment advisor. Special-event I make most of my own decisions but use an investment advisor for specialized needs such as retirement planning, asset allocation advice, or selecting alternative investments. Advisor-assisted I regularly consult with an investment advisor regarding most investment needs, but make most of the final decisions. Advisor-dependent I rely on an investment professional or advisor to make most or all investment decisions. 39% 30% 29% 33% 32% 28% 18% 25% 27% 10% 13% 16% 8

9 Who are the affluent? Spotlight on younger investors They're more insistent on independent investing: Be prepared to demonstrate your value MA M I have a portion of my investments with an advisor to compare results with my own investing 20% 43% 25% 21% 20% 14% 20% 44% 40% 28% 20% 17% Total Age <35 Age Age Age Age >65 I am relying less on an advisor and making more of the financial decisions without the assistance of a financial advisor 30% 57% 40% 31% 32% 20% 26% 44% 54% 28% 26% 23% 9

10 Who are the affluent? Take-away points Identify areas of opportunity Make sure you have a complete picture of client portfolios Target event-driven and self-directed investors (2/3 of the market) Become exceptional at demonstrating your value... particularly with younger investors 10

11 What s on their minds? 11

12 What s on their minds? Current financial outlook They re relatively optimistic My financial situation is better than it was one year ago I expect my personal financial position will be stronger one year from now MA % 48% 52% 49% 46% 48% M % 60% 68% 52% 54% 58% UHNW % 64% 80% 55% 58% 66% 12

13 What s on their minds? Retirement outlook They re confident about retirement I fully expect to have sufficient income to live comfortably during retirement I expect I'll be able to retire when I want MA 59% MA % 44% M 89% M % 62% UHNW 94% UHNW % 80% 13

14 What s on their minds? National concerns Political issues continue to dominate MA M UHNW Political environment 79% 84% 88% Top three Government gridlock Prolonged economic downturn Inflation National debt Tax increases Stock market performance Terrorism Increased interest rates

15 What s on their minds? Global outlook Clients need education and guidance to combat rampant home bias I am not willing to invest outside the United States MA 74% M 58% 74% UHNW 49% 74% 56% 43% Spectrem Group. 15

16 What s on their minds? Individual concerns Health and aging continue to be predominant issues MA M UHNW Maintaining my current financial position 69% 60% 42% The health of my spouse of 7 are health-related My own health Family health catastrophe Spending my final years in a care facility Having someone to care for me in my old age The financial situation of my children or grandchildren

17 What s on their minds? Take-away points Offer education and guidance Assess clients' risk levels Give clients perspective on current events Be a behavioral coach Teach clients about the benefits of global diversification 17

18 What do they expect from an advisor? 18

19 What do they expect from an advisor? Services snapshot Currently receive these services MA M UHNW Establishing an investment plan 52% 66% 65% Top five Selecting individual stocks and bonds Diversifying assets Creating a written financial plan Implementing tax-advantaged strategies Planning for retirement Establishing sufficient cash flow Creating an estate plan Selecting alternative investments Planning for long-term care Exercising stock options Evaluating insurance to determine appropriate coverage

20 What do they expect from an advisor? Services snapshot Plan to seek in future MA M UHNW Establishing an investment plan 15% 10% 6% Selecting individual stocks and bonds Diversifying assets Creating a written financial plan Implementing tax-advantaged strategies Planning for retirement Top 3 Establishing sufficient cash flow Creating an estate plan Selecting alternative investments Planning for long-term care Exercising stock options Evaluating insurance to determine appropriate coverage

21 What do they expect from an advisor? Long-term care (LTC) Do you have long-term care insurance? 24% 33% 37% MA M UHNW Reasons for not owning LTC insurance It's too expensive I have more pressing financial demands I'm saving for long-term care through other vehicles I don't expect to need it 10% 7% 14% 11% 12% 11% 30% 25% 24% 30% 38% 42% Where did you get information about LTC insurance? Family and friends My primary financial advisor Another professional 14% 18% 20% 24% 30% 30% 31% 39% 32% Mass affluent Millionaire UHNW 21

22 What do they expect from an advisor? Estate and wealth planning MA M UHNW My financial advisor will be involved in executing my estate plan 24% 40% 43% Spectrem Group. Whom have you consulted about a wealth transfer plan? Financial advisor 28% 43% 50% Attorney 26% 44% 69% Family 27% 35% 41% Charity 2% 6% 12% Other 2% 2% 4% None 46% 28% 16 22

23 What do they expect from an advisor? The next generation Be proactive: Make a point to get to know clients' families MA M UHNW I'm planning to introduce my family to my advisor 39% 55% 62% Spectrem Group. Ideal age to introduce my children/grandchildren to my advisor Under 18 21% 20% 15% % 31% 34% Over 25 19% 22% 26% It doesn't matter 28% 26% 25% 23

24 What do they expect from an advisor? Spotlight on younger investors They want an advisor who is more likely to relate to them personally MA M It is important that the cultural background of my advisor is very similar to mine 23% 43% 21% 23% 21% 25% 20% 27% 23% 56% Total Age <35 Age Age Age Age >65 23% 25% 24

25 What do they expect from an advisor? Prospects: Why they may hire you Honesty and transparency trump performance and fees Which factors are most important when choosing an advisor? Honest and trustworthy Provides transparency and keeps me informed Investment track record of advisor Fees or commissions charged Offers products from variety of companies Comes with strong referral or recommendation 94% 95% 96% 91% 93% 94% 91% 91% 89% 83% 85% 87% 78% 77% 73% 71% 68% 63% Mass affluent Millionaire UHNW 25

26 What do they expect from an advisor? Clients: Why they may fire you Responsiveness and communication trump performance Which of the following would cause you to change financial advisors? MA M UHNW Not returning phone calls in a timely manner 59% 61% 63% Not being proactive in contacting me Top 5 Not giving me good ideas and advice Not returning s in a timely manner Underperformance compared to market Advisor focuses only on investments, not my overall financial situation Doesn t understand my risk tolerance Losses over a span of 2 5 years

27 What do they expect from an advisor? Take-away points Find ways to exceed expectations Look for ways to broaden services or specialize Tax efficiency, estate planning, long-term care Be proactive in engaging client families Commit to a firm communication policy with clients Hone your pitch to emphasize client relationships more than performance 27

28 How do they want to communicate? 28

29 How do they want to communicate? Responsiveness A timely response is hours, not days MA M UHNW Within the hour 1 2 hours 7% 18% 25% 8% 19% 27% 8% 23% 31% 3 5 hours 6 12 hours 16% 11% 27% 18% 11% 29% 21% 12% 33% Next day 40% 38% 30% Next two days 8% 6% 5% Is it acceptable to hear back from someone else in the office? Yes No, I want to speak to my advisor 56% 44% 55% 44% 61% 39% 29

30 How do they want to communicate? Frequency of contact Overall satisfaction 80% 60% 20 pct. pts. MA Knowledge and expertise of advisor 83% 17 pct. pts. 66% Frequency affects clients' satisfaction... and their assessment of you Quarterly 81% Quarterly Semiannual/ annual 53% M Quarterly 86% 28 pct. pts. 25 pct. pts. Semiannual/ annual Quarterly Semiannual/ annual 61% Semiannual/ annual 80% 68% UHNW 81% 72% 12 pct. pts. 9 pct. pts. Quarterly Semiannual/ annual Quarterly Semiannual/ annual Spectrem Group. 30

31 How do they want to communicate? Advisor teams They prefer one-on-one interaction, but may settle for teams of three or less How many advisors should make up a team? I prefer one person that I consistently deal with MA M UHNW 67% 66% 55% 28% 22% 20% 32% 33% 29% 31% 39% 36% I prefer one primary advisor plus supporting team members I prefer a team approach % 9% 9% One Two Three Four or more One Two Three Four or more 31

32 How do they want to communicate? Effective communication Client communications leave room for improvement MA M UHNW Tips to improve... Face-to-face meetings Excellent Satisfactory Poor 57% % % 32 5 Agree on meeting agenda ahead of time Ask continual discovery questions Listen more, talk less Newsletters Excellent Satisfactory Poor 19% % % Use recurring columns to help set expectations/gain loyalty Include infographics Interview experts for fresh content Blog Excellent Satisfactory Poor 5% % % Post consistently Vary the media Invite guest bloggers 32

33 How do they want to communicate? Virtual communication They're ready to video chat now, texting still on the horizon I want to video chat with my advisor 49% MA 56% M 57% UHNW I want to text with my advisor 13% 12% 11% Millionaires under age 44 who want to text with advisor: 40% MA M UHNW 33

34 How do they want to communicate? Social media Social media use is prevalent at all ages 79% 67% 62% 57% 49% 55% 58% 55% 43% 31% 33% 28% 20% 23% 16% 11% 6% 11% 9% 6% 43% 38% 34% 29% 19% Facebook LinkedIn Twitter Google+ YouTube Under 35 Age Age Age and over Users are strongly engaged Mass affluent Millionaire UHNW 65% check in at least once per day 55% check in at least once per day 49% check in at least once per day 12% follow a financial commentator 24% follow a financial commentator 23% follow a financial commentator 34

35 How do they want to communicate? Social media Likelihood of getting financial or investment information from social media platforms Mass affluent Millionaire UHNW (not very likely) 100 (very likely) 35

36 How do they want to communicate? Take-away points Improve client interactions Scale your practice to devote more time to client interaction Look for opportunities to improve client communications Consider accommodating virtual communication Google yourself. How strong is your online presence? 36

37 Final take-aways Engage in client discovery Have a complete picture of client assets Find ways to broaden services or specialize Look beyond retirement planning Persuasively demonstrate your value Exceed client expectations Be a behavioral coach Provide education and guidance Address top-of-mind issues Focus more on relationships Hone your communication strategy Dedicate the time/resources for successful client interactions Establish a firm client communication policy Improve content Connect with the next generation Respect their confidence: collaborate, don't dictate Provide flexible communication options Stay apprised of trending topics on social media 37

38 How Vanguard can help Demonstrate your value: Advisor s alpha tool kit Quantifying your value Client guide: How your advisor adds value Improve your practice: Retaining heirs: Connecting with the next generation Connecting with female investors Social media for advisors Leverage expert commentary: Vanguard Blog for Advisors Economic outlook Vanguard advisor briefs Streamline investing: Vanguard investment tools ETF model portfolios Portfolio Analytics tool Adding passive to active scenarios Educate clients: Full series of client guides Caring for an elderly parent Investment basics Social Security 38

39 Important information For more information on Vanguard funds and Vanguard ETF Shares, visit advisors.vanguard.com or call to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing. Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling. All investing is subject to risk, including possible loss of principal. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks and bonds issued by non-u.s. companies are subject to risks including country/regional risk and currency risk. Diversification does not ensure a profit or protect against a loss The Vanguard Group, Inc. All rights reserved. U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623. Vanguard Marketing Corporation, Distributor of the Vanguard Funds. PID535119DOLU01/09/2016_CE 39

40 Who are the affluent? Insurance products Product ownership MA M UHNW Life insurance 59% $96 62% $226 60% $636 Fixed annuities 19% $58 25% $184 27% $524 Variable annuities 15% $63 22% $200 29% $665 Products, mean value Spectrem Group. 40

41 Who are the affluent? ETF/Mutual fund ownership ETFs 12% 16% 22% 30% 25% 52% 2009* % Domestic 6% International 2009* % Domestic 10% International 2009* % Domestic 18% International *No breakout. Mutual funds U.S. stock mutual funds Municipal bond mutual funds 59% 38% 70% 62% 62% 70% 20% 12% 28% 24% 25% 24% Other U.S. bond mutual funds International/foreign mutual funds 20% 12% 28% 24% 25% 24% 25% 15% 40% 31% 41% 41% Spectrem Group. 41