Schwab Study Shows Appetite for Advice on the Rise Among Affluent

06/27/2013

According to a new study from Schwab, seven in 10 affluent investors feel today’s financial markets are too complicated to navigate without an advisor. One-third of study participants also say their desire for investment advice has increased in the past year, and three-quarters say they are most confident making investment decisions when they collaborate with their investment professional; just one-third say they feel that same level of confidence when making investment decisions by themselves.

Advice and the Affluent Investor: A Study of Attitudes and Behavior by Charles Schwab (AAIS) surveyed more than 1,000 affluent Americans who receive some form of professional financial advice. Seventy percent of those surveyed work with a single advisor, and while on average their advisor handles 43 percent of their assets, nine in 10 want to work with an advisor who looks at their entire financial picture.

Trust and transparency are cornerstones of these relationships. Those surveyed trust individuals in the financial services industry (72 percent) more than financial services companies (42 percent), and 10 percent trust no one; an overwhelming majority want transparency around how their advisor is compensated for the advice they are providing (85 percent).

“Regardless of how much and how deep the advice, today’s affluent investors have one thing in common: they want a trusted expert on their side looking at the big picture on their behalf,” says Bernie Clark, executive vice president and head of Schwab Advisor Services.

As of May 31, Schwab’s suite of advice offerings for retail investors has grown to $139 billion assets under management from $114 billion the prior year. Additionally, as of March 31, Schwab custodied $895 billion in client assets for more than 7,000 independent Registered Investment Advisors (RIAs).

The study found that very few (11 percent) affluent investors see themselves as advanced investors; most label themselves as an intermediate (68 percent) and one in five (21 percent) describe themselves having beginner skills. Fully half of respondents see investing as a chore, and not an activity they particularly love or hate. Despite these tepid feelings, four in ten (41 percent) say they are much more involved in their investments in 2013 than they were in 2012.

“These investors may lack the experience and appetite to fully tackle the task-at-hand, but they absolutely understand that investing is a job that needs to be done and they do not want to go it alone,” noted Clark, adding that half of those studied use the word “comfortable” to describe how their investment professional makes them feel about their financial future.

Advice Orientation: One Size Does Not Fit All

Study participants put themselves in one of two advice-seeking camps: those who make all their own decisions even though they receive advice and guidance from an investment professional (59 percent of respondents), and those who use someone to make investment decisions for them without getting very involved (38 percent). But the findings show that even within these two camps, affluent advice-seekers are split on what they really want in these relationships:

54 percent of all respondents prefer to pick and choose specific areas for which they will pay for advice, while 46 percent prefer to pay one fee for advice that addresses their entire portfolio
52 percent want a solution that has worked successfully for other people like themselves, while 48 percent want an investment professional who provides a custom solution for their unique situations
53 percent want to work with an investment professional who makes changes to their portfolios when they are needed — based on the market and their needs — while 47 percent prefer someone who lets them know when they should consider making changes to their portfolio, along with the rationale for those changes
72 percent say they just want someone who can answer simple questions about investment choices, and a similar number (70 percent) say they want to have access to a team of professional advisors with expertise in taxes and legal issues such as trusts and wills

Positive Outlook with a Goal of Capital Preservation

Market optimism is prevalent among affluent investors who receive advice, with more than six in ten (63 percent) believing that the S&P 500 will continue its rise in the short-term. About that same number (65 percent) think their portfolio will perform on par with the S&P in the next six months, and nearly half (47 percent) think their investment goals will be easy for their advisors to achieve.

The majority of affluent investors who receive advice primarily invest to preserve capital (57 percent) rather than grow their assets (43 percent) and the vast majority (81 percent) say creating retirement income to last the rest of their lives is their primary investment goal.

Despite the overwhelming feelings of confidence, affluent investors are not without some concerns. Among the issues they are discussing with their advisors are market volatility, the interest rate environment, inflation and tax increases.

About Schwab’s Advisory Solutions

Schwab’s suite of advisory programs, with $139 billion in total (as of May 2013), provides clients with ongoing investment support and portfolio solutions including:

Schwab Advisor Network® – A referral to a local independent investment advisor who offers investment management for investors with more complex financial situations and specialized planning needs.
Schwab Private Client® – An ongoing private client relationship with dedicated representatives at Schwab and non-discretionary advice provided by Schwab Private Client Investment Advisory, Inc.
Windhaven Portfolios® – Broadly diversified strategies composed primarily of ETFs that strive to capture growth in rising markets while seeking to reduce exposure in declining ones.
ThomasPartners™ – A dividend income-focused money management strategy that provides a disciplined approach through diversified equity holdings based upon bottom- up fundamental analysis while remaining cognizant of overall exposure to specific asset categories or industries.
Schwab Managed Portfolios™ – Diversified portfolios of either mutual funds or ETFs designed for a range of investment strategies and managed by Charles Schwab Investment Advisory, Inc.
Managed Account Services – Specialized investment strategies for part or all of a portfolio, managed by professional asset managers.

About the Study

Advice and the Affluent Investor: A Study of Attitudes and Behavior (AAIS ) is an online study conducted by Koski Research from April 24-May 1, 2013, among 1,016 Americans ages 25-75 with $250,000 or more in investable assets, including retirement funds, who receive advice on some portion of their assets.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube, LinkedIn and our Schwab Talk blog.

Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value

Schwab Advisor Network member advisors are independent and are not employees or agents of Schwab.

Schwab Private Client, Windhaven Investment Management, Inc. and ThomasPartners, Inc. are registered investment advisers and affiliates of Charles Schwab & Co., Inc. "Schwab".

Portfolio management for Schwab Managed Portfolios is provided by Charles Schwab Investment Advisory, Inc. ("CSIA"), an affiliate of Charles Schwab and Co., Inc. ("Schwab").

Investing involves risk, including possible loss of principal.

Koski Research is unaffiliated with the Charles Schwab Corporation and its affiliates.

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