Affluent Investors Diversifying Financial Services Relationships

By NAPA Net Staff • 4/29/2015 • 0 Comments

One in three affluent Americans added a new financial services firm relationship last year, as consumers practice “stable two-timing” to combine the strengths of various firms to gain advice or resources, according to a new report.

The report by Hearts & Wallets indicates that multiple relationships are now the norm, with more than half (55%) of consumers with $500,000 in investable assets or more now working with three or more firms, up from 49% the year before. 

The report, Market Measures: Reach, Share & Other “Store” Success Measures, notes that a common pattern is “stable two-timing,” or balancing a self-service firm with a full-service firm. Other consumers tap into multiple high-service firms to obtain different advice perspectives, or several low-service firms to gain access to different web tools or other online capabilities. 

Market Share Leaders

Hearts & Wallets defines “stores” as retail and defined contribution providers that work directly with investors. The study measures leading stores for households with $5 million and less by market share, which is a function of reach (an advertising term which Hearts & Wallets uses to refer to the overall percentage of U.S. households having a relationship with the firm) share of wallet (the portion of each household’s assets managed) and the wealth of the households served. 

In converting reach of total relationships to primary relationships, full-service firms perform better than employer, self-service, hybrid or banks. Winning primary relationships is related to being a primary source of retirement advice.

Self- and Full-Service Contrarian Trends

Contrary to popular belief, self-service has deeper reach among affluent and high-net-worth customers than full service does — now reaching three-fourths of households with $3 million, according to the report. Self-service reaches more than 70% of investors with $500,000-plus, while full-service reaches just over 40%. According to the report, self-service reach stabilized in 2014 after a drop in customers the prior year.

Full-service firms are aggressively adding younger customers, with “Emerging” clients (ages 21 to 27) jumping from 5% in 2012 to 18% in 2014. “Early Career” clients (ages 28 to 39) increased from 14% in 2012 to 21% in 2014.  

According to the report, full-service firms are generally the most trusted, with about half of customers rating them a 9 or 10 on a 1-10 measurement scale for trust.

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