Breaking up is hard to do for some high-net-worth investors. According to the 2024 Global Survey of Financial Advisors by Dynasty Financial Partners, although a client may continue to use an advisor, it doesn’t necessarily mean they’re satisfied.
“Fear or intimidation of the prospect of change, as well as the uncertainty around whether any better options exist, are the key mindsets fueling ‘investor inertia,’” according to Dynasty. Nevertheless, the vast majority of HNW clients are satisfied with their advisors, the study finds.
The study seems to corroborate a YCharts survey that generated buzz earlier this year. YCharts claimed a “staggering” 75% of clients switched advisors or considered doing so in 2023. But when only those who changed from one advisor to another are counted, the YCharts study found that 52% of investors had switched.
Conducted in July, the Dynasty survey had a similar result: 48% of HNW clients have changed advisors. Breaking that number down, Dynasty reported that 25% have changed advisors once, 17% twice, and 6% three or more times.
“Most people haven’t hired more than one or two financial advisors, and it can be hard to know when it’s time for a change,” said Tim Oden, chief growth officer at Dynasty Financial Partners. “But if you’re not getting the attention or results that you were expecting, you owe it to yourself and to your family’s future to seriously consider other options. Especially as we experience continued volatility in the markets, now is a particularly important time to make an honest assessment of the service and attention you are receiving.”
The Dynasty survey queried 1,000 individuals, all of whom work with an advisor and have a minimum of $500,000 in investable assets. The breakdown:
Wealth
$500,000 to $999,000, 50%.
$1 million to $4.9 million, 36%.
Over $5 million, 14%.
Age
Younger than 35, 11%.
35-40, 19%.
45-54, 10%.
55-64, 45%.
65-74, 15%.
Gender
Men, 61%.
Women, 39%.
One Third Switched After Being Impressed by a New Advisor
Respondents to the Dynasty survey who switched advisers cited various reasons, including: investment performance (37%), an advisor’s retirement or firm move (35%), meeting a new advisor who impressed them more (30%), range of services/expertise (25%), and fees charged/structure of fees (19%).
Clients who have worked with their advisor for longer and have never switched are more satisfied, Dynasty reports. Younger clients, and those with less wealth are more likely to switch advisors, as are newer clients, which indicates a need for an “intentional year one experience to build trust and engagement,” according to the study authors.
Only 6% of clients reported being neutral or dissatisfied with their current advisor. Of the remainder, 70% were very satisfied, and 25% were somewhat satisfied.
The ‘Investor Inertia’ Factor
Those who expressed less than satisfaction but remained with their advisors cited a variety of reasons for not switching, including a sense of loyalty or obligation (29%), hadn’t thought about switching (29%), don’t think there are better options (27%), takes too much time (24%), don’t know how to find a new advisor (16%), and the advisor is a friend or family member (9%).
“Advisors may be relying on loyalty, or inertia, to hold on to dissatisfied clients,” the authors say.
Although few clients are less than satisfied, the report notes differences among those who are but stick with their advisors. Dissatisfied younger clients are more likely to focus on loyalty, while older clients are likely to cite lack of time or say they hadn’t thought about change. Those who have changed advisors once or twice in the past are likely to be less satisfied with their current advisor.
When asked why they might switch advisors in the future, most investors cited investment performance (47%) as the main reason. Following that were: change in the level of service (41%), advisor moves/changes firms (39%), and change in fee structure (33%). Further down the list were the client moving (17%), client’s spouse dying (6%) and client marriage or divorce (3%).
In 2020 McKinsey & Company reported the commonly cited figure that 70% of women who lost a spouse or partner through death or divorce fired their financial advisor. Another recent study found widespread advisor concern about the passing of clients — specifically the impending global transfer of $84 trillion from one generation to the next over the next 20 years. The Nataxis 2024 Global Survey of Financial Advisors, released Oct. 15, found that 46% of financial advisors globally say wealth transfer presents an existential threat to their business.
Different Motivations for Hiring and Firing
While the investors Dynasty surveyed cited investment returns and service as key motivators for replacing a financial advisor, they listed different reasons for hiring a new one:
Understood my specific needs, 59%.
Investment strategies or performance, 51%.
Technical expertise or knowledge, 47%.
Experience in working with people like me, 46%.
Professional certifications, such as CFP, CFA, 44%.
Range of products and services, 41%.
Compatibility or personal connection, 38%.
Level of client service, 37%.
According to the Dynasty report, satisfied clients are likely to say they considered a wide range of characteristics when they chose their advisor, with “understanding needs” the leading factor. “This speaks to the importance of asking the right questions and finding the right match,” the authors write.
The report also found that there has been a big change in how investors search for advisors, with younger clients much more likely to examine online advisor listings or use online search tools. Younger clients favor independence and smaller firms, but the term “fiduciary” doesn’t resonate with them, the authors report.
Older clients are likely to have been referred to their advisor and to have been with them for a longer time. Women are also more likely to have been referred to their advisor.
The Most Valued Service: Financial Planning
The Dynasty survey found that while the vast majority of clients (72%) value financial planning, the value they place on other services is likely tied to their unique needs or circumstances. “The lack of consistency in services values suggests a need for personalized/segmented offers,” the authors advise. For example, 45% of respondents say their financial advisor offers tax planning as a service, yet only 28% consider that service valuable.
Investors surveyed expressed confidence that their advisors could support them during key life transitions. However, respondents expressed concerns about potential conflicts; 48% cited the concern because their advisor’s firm profits from investment products their money is invested in. Younger clients are more likely to spot potential conflicts, according to the survey.
“Keep an eye on the next generation,” Dynasty urges advisors. “41% of the survey respondents’ adult children do not work with their financial advisor. Further, 34% likely will not in the future. The multigenerational opportunity is apparent; however, adult children clearly feel torn about working with the same advisor as their parents.”
In a four-decade career in journalism, Ed Prince has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News.
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