The Optimistic Affluent Investor – Episode 29
You don’t need us to tell you that in order to effectively serve affluent clients, you need to know what those clients are thinking—their outlooks, perspectives and levels of engagement with their wealth.
If you’re not certain where the affluent stand on such issues, you’re in luck: We’ve got some key answers for you, based on CEG Insights’ latest survey of more than 1,250 wealthy individuals—roughly 80% of whom have more than $1 million dollars of net worth (excluding the value of their primary residence).
KEY TAKEAWAYS
- Investor optimism is up from last year’s levels.
- The affluent are highly engaged in the investment management process.
- Investments with guaranteed returns are surprisingly popular.
FACE THE FACTS
One key finding from our research is that the affluent’s level of optimism is on the rise. For example:
- Just 28% of investors believe we are in a recession, while more than half say we’re aren’t. That marks a significant shift from last year’s survey, when more than 55% perceived a recessionary environment.
- Optimism permeates the financial outlook of most affluent investors, with more 70% feeling at least somewhat positive about what lies ahead financially.
Another key finding: Affluent clients are more actively involved in the management of their investments that you might assume. A full 54.1% of respondents say they’re actively involved in managing their investments daily. Notably, Millennials demonstrate the highest level of daily ongoing engagement—with 71.7% actively managing their investments. In other words, your clients are paying more attention than you think they are.
Finally, there’s this: More than half of the affluent—52.6%—say they prefer to have a guaranteed rate of return for the majority of their investments. This suggests that rather than taking risks, many of the affluent are concerned about protecting their portfolios from uncertainty and losses.
INSIGHTS INTO ACTION
These latest findings mean you should consider implementing a few strategic action steps:
- Talk to your clients about their risk tolerance. It’s great that clients have become more optimistic about the economy and their own financial futures. But excessive optimism can cause investors to forget about risk. With markets up and enthusiasm on the rise, it’s a good time to be that “risk reality check” that your clients may need. Likewise, given the demand for guaranteed return vehicles, you may want to talk to some clients about the pros and cons of low-risk/low-volatility investments to ensure their holdings reflect their ability to take investment risk.
- Communicate more frequently with your clients. We doubt most advisors would expect more than half of their clients to be actively engaged with their investments on a daily basis—and yet, that’s exactly the case. If they’re engaging with their finances frequently, but you’re not engaging with them often, you may be missing opportunities to gather additional assets or get referrals.
- Think about asset protection. Consider how well you’re incorporating investments that offer a level of consistency and protection into your line-up of solutions, and whether it might make sense to do more in this area.
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