Investors are Less Confident, More Open to Advice

Confidence is shrinking among investors, who tend to doubt their own abilities and say they feel better when then receive ongoing or periodic investment advice, according to a client survey released today by the discount broker Charles Schwab.

The share of investors who feel better off financially today compared to a year ago has dropped to 26 percent, down from the 44 percent who said they felt better at the end of 2010, according to a Schwab statement. Just one-third of the investors said they feel confident in their own ability to make financial decisions.

“Questions from clients about the market, their portfolios, and what the market environment means for them have been accelerating throughout the year, so naturally , the length and dept of conversations we’re having with our clients are also on the rise,” said Walt Bettinger, president and chief executive officer at Schwab.

Diversification of investments has been the top advice financial advisors are giving Millionaire investors surveyed in the fourth quarter by Millionaire Corner. More than 61 percent of Millionaires – those with a net worth of $1 million to $5 million not including primary residence – say their advisor has discussed diversifying assets away from a concentrated position. Financial advisors have also discussed creating a written financial plan and saving for retirement with just over half (52 percent) of Millionaires.

Half the Millionaire investors reported receiving advice on establishing sufficient cash flow to meet liquidity needs, and implementing tax-advantages strategies. Full-service brokers appeal to the largest share of Millionaires, 37 percent, while independent financial planners appeal to 18 percent and accountants appeal to 15 percent.

Millionaires report relatively positive relationships with their financial advisors. Seventy percent say they are satisfied, compared to 57 percent of non-Millionaire investors, but Ultra High Net Worth Investors report the highest levels of satisfaction. Eighty percent of this wealthier segment, defined as having $5 million to $25 million investable assets, says they are satisfied with their financial advisors.

More than two-thirds of Millionaires use just one financial advisor and report a preference for working with a large, diversified financial service firm. They tend to have long-lasting relationships with the advisors. Eighteen percent have worked with their professional for 15 years or more, while 19 percent have had the same advisor for 10 up to 15 years. More than two-fifths (41 percent) have worked with their advisor between three and nine years.

Wealthy investors put character above track record when selecting a financial advisor. Qualities such as being honest and trustworthy are considered important criteria for choosing an advisor by 98 percent of Millionaire investors, while past performance is considered by 93 percent.