Financial advisors do not seem to be recommending higher risk investments to their clients at this time, according to Spectrem’s Wealth Segmentation Series report Relationships with Advisors.
The report also reveals that only 17% of Millionaires said that their advisor had given them opportunities to invest in hedge funds, while 27% of Ultra High Net Worth investors got similar advice from their advisors.
In the research, Millionaires are investors with a net worth of between US$1 million and US$5 million Not Including Primary Residence and Ultra High Net Worth investors have a net worth of between US$5 million and US$25 million NIPR.
Advisors are more likely to recommend higher risk investments such as hedge funds to their younger clients. Among Millionaires surveyed who are under 45 years old, nearly one-third (31%) said their advisor has given them opportunities to invest in hedge funds. Seniors over 65 were least likely to have received these opportunities.
The wealthier investors, those with a net worth between US$15 and US$25 million, were presented with hedge fund investments to a much larger degree. Forty-six percent received recommendations to invest in hedge funds from their advisors (the overall average was 27%).
Only 8% of UHNW investors who consider themselves ‘professionals’ such as doctors and layers received advice on hedge funds, while 24% of senior corporate executives did.
While the highest percentage of financial advisors is telling their Millionaire clients to invest in stocks (29%), they are also advising to proceed with caution in other investment areas. Only 10% of Millionaires report being told to consider high risk investments.
More than twice as many (23%) report being told to develop a more conservative portfolio. Nineteen percent are being advised to hold their investments in something safe until the economy gets better.
Age, again, is a factor in risk management advice, with seniors most likely to be told to develop a more conservative portfolio and to hold their investments in safer vehicles. Only six percent of those over 65 report being told to invest in more high risk investments.
The same is true for UHNW investors. Thirty-four percent are being told to invest in stocks, 28% in tax-free investments, and 28% are being told to develop a more conservative portfolio. Only 8% are being told to invest more aggressively.