Rich clients trust you

Wealthy investors aren’t bullish about the markets and the economy, but they do have confidence in their advisors.

Specifically, rich clients trust in advisors’ abilities to meet their investment goals, say two companion surveys released by Charles Schwab Advisor Services.

While the Independent Advisor Outlook Study found 45% of independent advisors are bullish about the current market, only 29% of wealthy investors share the same sentiment.

At the same time, a third of clients (32%) believe it will be difficult for advisors to help them navigate volatile markets. The majority of investors, however, have full confidence in their planners’ skills, and 25% have no doubt their expectations and goals will be met.

Their main worries include low returns (57%) and market losses (37%). So, despite reports that trust in the industry has declined, advisors are providing clients with strong support.

“It matters less whether clients are optimistic or pessimistic and more that they are realistic about the outcomes they are working towards,” says Bernie Clark, executive vice president and head of Schwab Advisor Services.

He adds, “This is where advice really takes center stage. [Advisors and planners] can provide perspective and expertise within the context of a client’s long-term goals. While investors are bombarded daily with economic information, their advisors play a valuable role in helping them separate the noise from the news, and in translating that information into tailored strategies.”

Over one-third (37%) of rich investors confirmed they want more investment advice. When working with a financial advisor, investors value knowledge (71%), advice (59%), investment performance (49%), trust (48%) and service (47%).

“High-net-worth investors are looking for a lot more from advisors than just performance,” says Clark. Advisors who provide unbiased advice and talk plainly with their clients about goals and challenges will be successful, he says.

What worries them?

What’s driving investors to seek more advice? They are worried about headline-grabbing risks at home and abroad, such as uncertainty about taxes and inflation (78%), government deficits (58%), political gridlock (57%), and the economic crisis in Europe (54%).

As a result of macro-economic worries, clients need comforting. Advisors indicate in the past six months, over a quarter of their clients (27%) needed reassurance they would meet their goals.

Almost all advisors (93%) reported gaining new clients over the past year. The biggest source of these new clients has been investors leaving full-service brokerage firms (39%). Other sources were do-it-yourself investors (20%) and banks (10%).

For the first time, the Independent Advisor Outlook Study asked about the role of women in client relationships.

The study found women are part of decision-making around finances nearly 60% of the time, either as the primary or sole decision-maker (21%) or as part of a couple making joint decisions (38%).

Read: How to help couples who disagree

In terms of meeting with women separately, the majority of advisors (79%) state it’s not necessary. The couple or family as a unit are their clients, and their collective needs are the focus of planning sessions.

Economic outlook

In terms of economic outlook, clients tend to be more pessimistic than advisors.

A third (31%) of wealthy investors think unemployment will increase, versus only 18% of advisors; 27% of investors believe there will be a double-dip recession in comparison to only 14% of advisors; and 60% of investors see inflation increasing, versus 44% of advisors.

Both groups, however, forecasted consumer spending and savings will increase.

Almost half (45%) of advisors are currently bullish, up from 37% six months ago. More than two-thirds (67%) of advisors believe the S&P 500 will increase.

Independent advisors plan to invest more in equities over the next six months, and 41% plan to invest more in domestic large-caps. Interest in domestic small-caps is also up significantly, almost doubling over the past six months from 12% to 23%.

Overall, 34% of advisors are more interested in selling ETFs, while only 4% want to invest in foreign currency. Advisors continue to see information technology (48%) and energy (37%) as leading market sectors over the next six months.