A new Cogent Syndicated report from Escalent shows even affluent investors (those with $100,000 or more in investable assets) are feeling the strains of inflation with a 20 percent point decrease in financial confidence from 2021. Just four in ten affluent investors (41%) rate their current financial situation as “very good” or “excellent,” down from six in ten (61%) in 2021. Inflation is the most immediate financial concern for affluent investors (62%), followed by market volatility (39%)—both at significantly higher levels than last year (44% versus 33%, respectively).
These are the key findings from Escalent’s Cogent Syndicated Investor Brand Builder™ report, which is designed to support firms with critical decision-making in the areas of competitive positioning in a dynamic business environment. The report helps firms develop sophisticated targeting through advanced investor segmentation and uncover opportunities to strengthen brand equity among key segments and influencers.
The proportion of affluent investors in retirement decreased for the second straight year due to the heavy toll of inflation and shrinking portfolios. Affluent investors who are either fully or partially retired fell from 42% in 2020, to 39% in 2021, to 38% in 2022, potentially feeling the need to delay or come out of retirement in order to maintain their desired lifestyle in their golden years.
“While inflation continues to weigh on affluent investors, it’s important for advisors to provide reassurance and encourage their clients to avoid making drastic investment decisions that are rooted in emotion,” said David Keen, senior director in the Financial Services division of Escalent.
Investors who work with a financial advisor or investment representative are now dedicating a smaller proportion of their financial portfolios to be managed by their advisor, keeping an increased amount of assets to manage independently. Traditionally advised investors distribute three-quarters (72%) of their portfolios to a financial advisor, on average, while adviced investors allocate two-thirds (66%) of their portfolios to an investment representative who is part of a service/support center associated with their investment account provider.
“With 20% to 30% of these advice segments managing their assets independently, a clear and direct opportunity exists for advice providers to step up, support investors, and manage assets that are currently not being managed by their financial advisor or investment representative,” added Keen.
Loyalty to advisors has decreased significantly from 2021, influenced by declines among Gen Xers and investors with $500,000 to less than $2 million in investable assets. Fewer than six in ten (57%) affluent investors say they would be highly likely to follow their advisor to a new firm, down from 62% from a year ago, indicative of a softening in advisor-client relationships year-over-year.
Cogent Syndicated conducted an online survey of a representative cross section of 4,924 investors from June 24 to August 12, 2022. Survey participants were required to be 18 years or older, are sole or shared household financial decision-makers, and have at least $100,000 in investable assets including DC plan and IRA assets but excluding the value of primary real estate. Cogent Syndicated uses market-sizing incidence survey findings, which are weighted to US census data, to develop quota targets followed during fieldwork and apply minimal statistical weighting post-fielding. The data have a margin of error of ±1.4% at the 95% confidence level. Escalent will supply the exact wording of any survey question upon request.
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