Due diligence may not be the top priority when wealthy clients seek a financial advisor, but such clients can also be quick to switch
Being highly visible to high-net-worth individuals may be all you need to do to secure them as a client, according to new research.
It found that these wealthy people may seek help with their finances following a major life event, but their due diligence may be minimal with 57% deciding to work with the first advisor they speak to.
The survey by Dynasty Financial Partners of those who work with an advisor and have at least $500,000 in investible assets also discovered that the decision to contact an advisor is likely to have been triggered by an inheritance, change in employment situation or other major event.
Dynasty’s CEO, Shirl Penney, said that important events such as these demand robust due diligence.
“It’s an extraordinary finding that high-net-worth families are selecting the first and only advisor they speak with. It’s like buying the very first house you look at,” Penney said. “Investors need to ensure their chosen advisor has the right experience to handle the often-complex nature of these life events for families of significant wealth.”
Referrals remain an important source of new clients, with almost half of respondents stating they were referred by a friend or family member of a colleague, and 23% citing a professional advisor, such as an accountant or lawyer. Almost a quarter found an advisor on social media, a blog or other online source.
Easy come, easy go
While the lack of consideration when choosing a financial advisor may be surprising, the ease with which HNW clients may decide to switch advisors is also surprising.
The survey found that if these clients feel that the relationship with their advisor isn’t trustworthy or high value, they are likely to switch to another. For those aged under 45, 61% said they had changed advisors in the past because of a mismatch with their advisor.
Investment performance and not feeling like a valued client are other key reasons cited for changing advisor.
“By performing appropriate due diligence, wealthy families could select an advisor that is a better fit from the beginning, instead of expending a lot of time and energy with the wrong advisor,” Penney said.
The Dynasty Connect survey was conducted in partnership with Absolute Engagement between April 20 and May 1.