A new study finds that millionaire investors have a positive current financial outlook, but they are uncertain about the future and are looking to advisors for help.
In the midst of the longest bull market in history, Fidelity Investments’ 2018 Millionaire Outlook Study reveals that investor sentiment is at its most striking disconnect — with the highest ever current financial outlook, but a near-record low for future financial outlook.
The study’s “current outlook” consists of five measures based on millionaires’ assessment of the current strength or weakness of the following: economy, stock market, value of real estate, consumer spending and business spending. The “future outlook” consists of the same measures, but it’s based on millionaires’ assessment of how much stronger or weaker they think each will be a year from now.
With an index range of 100 to -100, the current outlook for 2018 registers at 48, but future financial outlooks registers at 7. By comparison, the 2017 study shows the current outlook at 32 and future outlook at 28.
Millionaires are most skeptical about the future of both the economy and the stock market, signifying the greatest uncertainty since before the 2008 financial crisis, the study notes. Meanwhile, the value of real estate is mostly driving the positive current outlook, compared to last year when stock market sentiment was most positive.
Advisor Impact
Concerns about the future, however, are mitigated by having an FA. According to the findings, those investors with an advisor are more positive on all metrics – including future outlook – than those without an advisor.
Moreover, the study shows that millionaires’ perceptions of their advisor “proving their worth” continues to strengthen. In 2018, 76% of advice users agree that their primary FA has really proved his/her worth over the past year, compared to 70% in 2017 and 68% in 2016.
“We’re in the midst of the longest bull market in history, which means that most investors have seen upside in their portfolios for almost 10 years, but they’re beginning to think about how to prepare for a future that may have some more bumps,” explains David Canter, head of the registered investment advisor segment at Fidelity Clearing & Custody Solutions. “So, right now in particular, advisors are going to be hugely important in helping their clients plan for the future.”
Investment Management
Meanwhile, nearly half of millionaire respondents value money management the most from their advisors, but many are also focused on higher-level services, including financial planning (retirement, college and estate planning), peace of mind (taking care of family members, freedom from worry) and fulfillment (leaving a legacy).
In addition, the study notes that non-advice users value higher level value stack services even more than advice users, as they’re more self-directed in investing. The authors suggest that this represents an opportunity for advisors to develop and market these types of services.
“What we continue to hear from investors is that managing the money is the foundation of their relationship with advisors – but they want more,” Canter notes. “Advisors need to think about how they’re helping their clients achieve their life goals and dreams.”
In fact, advisors who deploy new growth engines relating to an “intelligence quotient (IQ), emotional quotient (EQ), digital quotient (DQ) can generate greater loyalty and more referrals,” the study suggests. According to the findings, 89% of millionaires who work with advisors with high IQ, EQ and DQ were more likely to recommend them and referred their advisors almost 2 to 1 versus all other advisors.
“In order to appeal to investors, we believe advisors need to provide them with a new ‘standard,’” Canter further explains. “They need not just an ‘intelligence quotient’ in handling clients and their portfolios, but also an ‘emotional quotient’ to better connect and even a ‘digital quotient’ to evolve their customer experience.”
Navigating Tax Reform
The study further emphasizes that tax reform may represent a missed opportunity on the part of some advisors, given the willingness of investors to pay more for this service.
According to the findings, more than half of the millionaires surveyed said they would be willing to pay more for FAs who can help them navigate the recent tax overhaul. Yet only 4 in 10 millionaires with an FA said the advisor “proactively reached out to them” regarding the impact, while nearly the same amount indicated they have not had any conversations with their advisors regarding the reforms.
The study is based on an online survey conducted March 22 through May 8, 2018, involving 1,429 investors, including 639 millionaires.
