Advisors let down by ‘promising’ clients

Advisors let down by ‘promising’ clients

Advisors let down by ‘promising’ clients A Florida-based financial services firm released a report recently that spotlights the “high net worker,” an emerging demographic that all advisors will be hungry for but aren’t necessarily all they’re cracked up to be. In fact, they just might be more trouble than they’re worth.

With an average household income of $374,000 (all figures in U.S. dollars), $750,000 to $1 million in investable assets, a vast majority between the ages of 41 and 63, and who put in well over 50 hours work each week and are very hard to resist.

But consider the downside of this highly educated group of professionals.

“I have a lot of professionals at high income levels,” said Brent Vandermeer, an advisor with Hollis Wealth Inc. in Ottawa. “I had a chat with someone yesterday talking about lawyers after they finish school. These people come out with so much debt and then right away they want to live the lifestyle or at least the image of the professional. Some of them are saddled with $75,000 in debt and all of sudden their income goes up to six figures and they’re leasing BMW’s and buying expensive houses and trips. But you’ve have this debt that’s going to take you 10 years to pay off at the rate you’re doing it.”

Not only is consumption a big problem with the high net worker but so too is an aversion to risk that’s keeping them from diversifying their investments beyond real estate. According to Everbank’s survey, 69 per cent of HNW households consider themselves conservative investors and really haven’t gotten over what happened to stocks in 2008.

The combination is potentially harmful to their ability to enjoy retirement.

"The high net worker would benefit from a periodic focus on their longer-term finances and some additional financial education," says Frank Trotter, executive vice president of EverBank. "Something to consider is that with a strong earnings stream, a family may be complacent, since essentially all of their current needs are met out of cash flow effortlessly. One can think that it will all continue forever."