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Kim Butler
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Partners for Prosperity, Inc.

City:Mt. Enterprise

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I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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The Relationship Between Wealth and Advisor Usage

Younger investors have less appreciation of the work done for them by advisors.

| BY Kent McDill

Investors have to wonder, does wealth come before advisor usage, or does advisor usage lead to wealth?

There is a relationship between wealth level and advisor usage, according to data compiled by Spectrem’s Millionaire Corner report Affluent Market Insights 2014. Simply put, the wealthier the investor, the more likely he is to use a financial advisor.

The AMI also shows that advisor usage is up through all wealth segments.

For Spectrem’s report, three wealth segments were studied: Mass Affluent, with a net worth of between $100,000 and $1 million; Millionaires, with a net worth between $1 million and $5 million, and Ultra High Net Worth, with a net worth between $5 million and $25 million.

In 2013, 88 percent of UHNW investors used a professional advisor and 34 percent used a full service broker, which was the most popular choice of professional advisor among all wealth segments.

The AMI showed that there were more UHNW investors in 2013 than in 2012, with an increase from 1.14 million in 2012 to 1.24 million in 2013. There were only 840,000 in 2008 UHNW investors when the recession first hit.

Among Millionaires, 81 percent used a financial advisor in 2013, an increase of six percent from 2012’s report of 75 percent. Thirty-five percent of Millionaires turned to full service brokers for assistance, and 17 percent used an independent financial planner.

The number of Millionaires in America reached a new high of 9.63 million, an increase of more than 600,000 from 2012.

The AMI revealed that there were 38.6 million Mass Affluent people in America in 2013 up from 31.2 million in 2008 after the recession hit. Among Mass Affluent investors, 69 percent used financial advisors, an increase of four percent from the year before.

Other than a full service broker or an independent financial planner, the only other specific types of advisor used by at least 10 percent of investors are the independent investment advisor (RIA) or the investment manager. Eleven percent of UHNW investors use an independent investment advisor, and 11 percent of all wealth segments use an investment manager.

Online brokers are becoming more popular all the time, as regulations change and social media usage increases. But in 2013 only eight percent of Millionaire investors used a discount or online broker, seven percent of Mass Affluent and seven percent of UHNW investors. Look for those numbers to increase in the 2015 AMI.

The question of whether the use of a financial advisor leads to greater wealth came up as soon as the recession hit. Advisors who might have warned an investor about possible economic dangers would obviously have been very helpful in retaining wealth during that time, if not actually growing portfolios.

Among investors interviewed for Spectrem’s Millionaire Corner research study Changing Investor Attitudes and Behaviors, 16 percent of Mass Affluent investors said they wished they had used a financial advisor to a greater degree before the recession hit. Eleven percent of Millionaires and 9 percent of UHNW investors agreed that they wished they had used their advisors more before the recession.

Oddly, between 2 and 3 percent of all investors said they wished they had used their advisors less during that time.

Spectrem research also shows the level to which investors believe their advisors deserve credit for their financial success. Investors were asked to rate where they credit should lie between themselves and their advisors on a sliding scale from 0 (themselves) to 100 (their advisor).

UHNW investors averaged at 39.74, obviously leaning toward themselves but giving more credit to their advisors than Millionaires (39.16) or Mass Affluent investors (37.19).

As the economy improves, so do advisors, apparently. The approval rating for advisors went up among all wealth segments from 2012 to 2013, with UHNW climbing from 73 to 80 percent approval, Millionaires going from 72 to 73 percent and Mass Affluent getting over the 70 percent mark to 72 percent from 69 percent in 2012.

Age plays a factor in satisfaction with an advisor, apparently. Among Millionaire investors under the age of 45, the approval rating was just 62 percent in 2013, but it climbed to 74 percent among investors over the age of 64.

  

 



About the Author


Kent McDill

kmcdill@spectrem.com

Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.

In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.

McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.

McDill is the father of four children, and an active fan of soccer, Jimmy  Buffett and all things Disney.

 


 

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