Only a third of millionaires use a wealth advisor for their financial planning and 1 in 5 plan to fire their advisor due to high costs and poor service, according to a new survey from Long Angle, the professional network for startup founders and CEOs. Of those who do use an advisor, 26% are considering switching and 18% may stop using an advisor altogether.
Millionaires, on the other hand, are very satisfied with their personal trainers, therapists and other professionals who help with their overall well-being and family care, rather than financial problems.
“Improving your balance sheet or bank account doesn’t deliver the same emotional value as improving your health and family life,” says Chris Bendtsen, head of market intelligence at Long Angle. “Services for the personal well-being of your children score the highest.”
The results highlight the growing importance of so-called “soft services” for the wealthy, as asset managers, private banks and other companies try to attract and retain more affluent customers. Once considered superficial next to financial advice and tax planning, health and wellness, family and children, and travel and self-improvement services have become core competencies in advising and helping wealthy families.
For the study, Long Angle surveyed 114 people worth at least $2 million, with the majority having a net worth between $5 million and $25 million. It asked them to rank their satisfaction levels with 14 of the most common professional services used by the wealthy, from investment advice and estate planning to sports coaching and housekeeping.
Personal services, childcare and education top the list for satisfaction. On a scale of 1 to 10, the millionaires surveyed gave their personal trainers an average score of 9.3, the highest satisfaction for any service category. They were also happy with their investment visa advisors (8.8), followed by their personal sports coach and therapist. They also highly value services for their children, including private school (8.3) and childcare (8.2).
Financial, housing and real estate services are at the bottom. The results in the field of asset management are particularly remarkable. The satisfaction level for wealth advisors was 7.2, with most respondents saying they don’t even use an advisor. The use of financial managers increases with wealth. Of those with assets of $5 million or less, only 22% use an advisor, compared to 44% of those with $25 million or more.
Their main complaint is the cost. According to the study, the average spend for financial advisors is $10,000 per year. A majority of respondents pay a fee based on a percentage of the assets under management. A third of respondents pay a fixed annual amount.
Many clients increasingly view asset-based fees as inherently skewed, as the manager is paid more simply based on the size of assets rather than on performance or quality of service. Frustration with costs is one of the reasons that more and more advisors are switching to fixed rates.
“Flat fee structures reflect a growing customer preference for transparent pricing and reduced conflicts of interest,” the report said.
In addition to the costs, wealthy investors are also frustrated with the service.
“The general feedback is that advisors are often slow to respond and that the advice is not personalized,” says Bendtsen.
Accountants and tax lawyers did not fare much better. While 82% of respondents use a CPA or tax professional for their taxes, 42% are considering switching tax professionals. Their main complaints were that CPAs were slow to respond and not proactive or strategic enough.
In the field of estate planning, half of the millionaires surveyed do not use a wealth lawyer, although their use is highly dependent on their level of wealth. Of those with $25 million or more, 69% use an estate attorney. When it comes to satisfaction levels, real estate attorneys rank among the pool services.
The poor numbers for financial and legal services providers, and high numbers for more personal services, go beyond the predictable emotional benefits of feeling and looking better every day. Athletic trainers, sports coaches, teachers and even cleaners seem to be better at providing the kind of customized, targeted help the wealthy are looking for than the one-size-fits-all solutions that wealth managers and lawyers typically offer.
“What we heard is that asset managers, real estate attorneys and CPAs are feeling more transactional,” Bendtsen said. “They don’t feel personal.”
Children’s services also get high marks and a large share of spending from the wealthy. Respondents spend an average of $53,558 per year on their nanny, $30,000 per year on private school and $20,000 per year on child care. Private schools and childcare both scored above eight for satisfaction despite the price.
Therapy is becoming increasingly important for the wealthy, especially the younger wealthy. Millionaires gave their therapists an average high score of 8.3. Their average expenditure on therapy is $5,000 per year.
Nearly half (43%) of millionaires under 40 use a therapist, compared to just 13% of millionaires over 50. Among those who use a therapist, the top benefits were quality of care and impact, as well as friendliness and having a personal connection.
“I think people under 40 are more proactive when it comes to their mental health and emotional well-being,” says Bendtsen.
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