Reputation has emerged as the most important factor Main Street Americans consider when shopping for financial services, according to a new study by Spectrem Group, a Chicago-area market research firm specializing in wealthy investors.
The vast majority (81 percent) of Mass Affluent investors say the reputation of a financial service firm is a key investment factor, and rank risk and diversity as the second and third most compelling factors. The sentiment is a shift from attitudes held in the fourth quarter of 2010 when investors expressed more concern over risk (79 percent) than reputation (78 percent). Diversity ranked as the third most important factor.
Spectrem defines Mass Affluent investors as those with a net worth between $100,000 and $1 million (not including primary residence). Credit a rebound in the stock market or blame investor fatigue over the course of a prolonged economic downturn, but April’s survey also reveals that the Mass Affluent have considerably less enthusiasm for being actively involved in the day-to-day management of their investments (40 percent, down from 65 percent in 2010). And whereas last year 52 percent said that they enjoy investing and would not want to give it up, this year only 35 percent expressed this attitude.
Baby boomers ages 55-64 are the least likely to say that they like to be actively involved in the daily management of their investments and that investing is something they would not want to give up. Old habits die hardest for investors ages 65 and up. They are most likely to say they want to be involved in the management of their investments, while investors ages 54 and under are most enthusiastic about investing.
Not surprisingly, investors who identify themselves as Self-Directed are most likely to be actively involved in the management of their investments, while those who have sought out a professional advisor to handle all of their investments are the least likely to want to be involved. They are also the least likely to say that they enjoy investing.
While they may have lost some of their enthusiasm for investing, the Mass Affluent are still more likely than not to rely on themselves to make their management decisions. Seventy-percent say that they are either Self-Directed (38 percent) or Event-Driven (32 percent), meaning that they consult with an advisor for specific needs such as retirement planning. Younger investors ages 54 and under are most likely to describe themselves as Self-Directed or Event-Driven , while a quarter of the oldest investors ages 65 and up think of themselves as Advisor-Assisted, meaning that they regularly consult with a professional advisor, but still make most of the final decisions regarding their investments.