Fifth Annual Advisor Authority Study Reveals Nearly Two-Thirds of Ultra High Net Worth Investors Believe Market Volatility Will Increase--and Increase Their Likelihood of Working with an Advisor

Louisville, KY — Nearly six in ten High Net Worth (HNW) investors and nearly two-thirds of Ultra HNW investors anticipate market volatility will increase in the next twelve months (59% vs. 65%). A similar number of the HNW and Ultra HNW say that market volatility will increase their likelihood of working with an advisor in the next twelve months (56% vs. 63%). These are among the latest findings from the fifth annual Advisor Authority study of roughly 1,600 RIAs, fee-based advisors and individual investors commissioned by Nationwide Advisory Solutions and conducted online by The Harris Poll.

Helping more affluent investors address top concerns and manage the dynamics of today’s complex markets are key for gaining their trust and earning their business. Among the HNW, with investable financial assets ranging from $1 million to less than $5 million, and the Ultra HNW, with investable financial assets of $5 million or more, roughly one-fourth still do not have a financial advisor (27% and 22%). The opportunity is substantial. Advisor Authority reveals actionable insights and proactive strategies to help RIAs and fee-based advisors compete more effectively for this valuable client segment, by profiling the unique needs of the HNW—and how their needs change as they ascend to the ranks of the Ultra HNW.

“While managing taxes and protecting assets remain among their top financial concerns, High Net Worth and Ultra High Net Worth investors need help to identify potential blind spots and bridge the preparation gap, especially in times of uncertainty. More affluent investors say the top benefit of working with an advisor when markets are volatile is staying focused on long-term goals,” said Craig Hawley, Head of Nationwide’s Annuity Distribution. “RIAs and fee-based advisors say targeting the High Net Worth and Ultra High Net Worth is among the top three factors that will enhance the profitability of their practice, and our latest Advisor Authority study uncovers the key factors they need to attract and retain these more affluent clients.”

Identify Blind Spots and Bridge Preparation Gap

With volatility top of mind, having more wealth does not always translate into a substantially more optimistic financial outlook. While the optimism of Mass Affluent investors fell eight percentage points, to 52% in 2019 from 60% in 2018, optimism of HNW investors fell ten percentage points, to 55% in 2019 from 65% in 2018, as concerns about markets, economics and politics at home and abroad, continued dominating the headlines. Optimism of Ultra HNW investors increased six percentage points, to 64% in 2019 from 58% in 2018, potentially fueled by the prospects of a finance-friendly tax plan, cuts to regulations and a business-friendly majority in the Senate.

The HNW are less optimistic than the Ultra HNW, yet they are less aware of the potential risks in the market and the economy, and they are less prepared. The HNW are less likely than the Ultra HNW to say their outlook for the U.S. Stock Market over the next twelve months is optimistic (47% vs. 58%) and less likely to say their outlook for the U.S. economy over the next twelve months is optimistic (51% vs. 58%). And yet, HNW investors are less likely than Ultra HNW investors to be concerned about a U.S. bear market over the next 12 months (54% vs. 63%.) and less likely to be concerned about a U.S. economic recession over the next 12 months (56% vs. 66%).

Protecting Assets: Top Priority to Attract the More Affluent

More wealth means affluent investors have more to lose as markets fall and the economy slows. Protecting assets is a top financial concern for investors at every level—especially for the more affluent. While the number-one financial concern of the HNW and Ultra HNW this year is taxes (38% vs. 34%), protecting assets is a close second (37% vs. 33%), and the cost of healthcare is a more distant third (30% vs. 19%). Protecting assets was HNW investors’ number-one financial concern by a wide margin in prior years (45% in 2018, 41% in 2017, 41% in 2016). Likewise, protecting assets has been Ultra HNW investors’ number-one or number-two financial concern in prior years (28% in 2018, 40% in 2017, 33% in 2016).

More than one-fourth of HNW investors (26%) and more than one in ten Ultra HNW investors (14%) don’t have or don’t know if they have a strategy to protect their assets, but a solid majority do have a proactive strategy to protect their assets against market risk (74% and 86%). The HNW and Ultra HNW are equally likely to rely on diversification to manage market risk (64% and 63%). However, the Ultra HNW are far more likely than the HNW to employ a more diverse range of solutions. This includes fixed annuities (54% vs 22%), liquid alternatives (49% vs 27%), market linked CDs (41% vs 25%), fixed index annuities (37% vs 15%), and smart beta ETFs (31% vs 8%).

Even the More Affluent Need to Protect Lifetime Income

The retirement income challenge is real—even for the more affluent. The typical investor is nearly twice as likely to say that saving for retirement is a top financial concern compared to more affluent investors (23% All vs 13% HNW and 12% Ultra HNW). Yet typical investors and more affluent investors are equally likely to say that generating reliable income during retirement is a top financial concern (13% All Investors, 15% HNW, 12% Ultra HNW). In fact, more than one-fourth of HNW investors (28%) and one in ten Ultra HNW investors (10%) don’t know or are not sure which solutions they should use for generating retirement income during periods of market volatility.

While the vast majority of more affluent investors do have a strategy in place to protect against outliving their savings, the Ultra HNW are more likely to be prepared than the HNW (93% vs. 84%). The Ultra HNW are less likely than the HNW to rely on Social Security (66% vs. 77%) and they are far more likely to employ a diverse range of different income generating annuities. These include variable annuities with living benefit riders (42% vs 25%), Longevity Insurance/Deferred Income Annuities (or DIAs 35% vs 9%), Qualifying Longevity Annuity Contracts (or QLACs 32% vs. 8%), Single Premium Immediate Annuities (or SPIAs 30% vs 11%) and Contingent Deferred Annuities (CDAs 29% vs 7%).

The More Affluent Seek Holistic Unbiased Advice

Year-over-year, more affluent investors consistently say by a wide margin that the single most important reason for having a financial advisor is to feel more confident in their financial future, cited by roughly one-third of HNW and Ultra HNW investors (35% and 30%) in this year’s study. In recent years, more affluent investors most frequently cite advisor experience, personalized advice for a holistic financial picture and a fiduciary standard among their top three reasons for choosing to work with an advisor. This creates a clear opportunity for RIAs and fee-based advisors. In fact, this year’s study shows that nearly three-fourths of the HNW (72%) and more than 8 in ten Ultra HNW (82%) say there should be one federal fiduciary standard across the financial industry.

For additional insights on the issues HNW and Ultra HNW investors face and the innovations RIAs and fee-based advisors can use to create safe havens in an uncertain world, download the latest Advisor Authority infographic at: https://know.nationwideadvisory.com/AdvisorAuthority2019_HNW_UHNW_Investors_Infographic

The fifth annual Advisor Authority study explores the investing and advising issues confronting RIAs, fee-based advisors and investors—and the innovative techniques that they need to succeed in today’s complex market. These latest findings are to be followed by a series of ongoing reports that will be released through the first quarter of 2020.

About Advisor Authority: Methodology

The fifth annual Advisor Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide Advisory Solutions from February 15 – March 4, 2019 among 1,021 financial advisors and 824 investors, ages 18+. Among the 1,021 financial advisors, there were 507 Registered Investment Advisors and 514 Broker/Dealers. Among the 824 investors, there were 340 female investors and 484 male investors, and there were 205 Mass Affluent (Household Investable Assets of $100,000 to less than $500,000), 205 Emerging High Net Worth ($500,000 to less than $1 Million), 207 High Net Worth ($1 Million to less than $5 Million) and 207 Ultra High Net Worth ($5 Million or more). Advisors are weighted where necessary by employment status and active management to bring them in line with previous years’ profile. Investors are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, household size, investable assets and propensity to be online to bring them in line with their actual proportions in the population.

About The Harris Poll

The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.