Some of the wealthiest consumers are reticent to work with financial professionals, and courting these individuals could allow financial professionals to dramatically increase their client numbers. In a new survey from Deloitte’s Center for Financial Services, almost one-third of individuals with a net worth in excess of $1 million revealed they have not spoken to a financial professional about managing their wealth.
That could be interpreted as a sign of confidence from the consumers, but it actually might indicate a general lack of trust in financial professionals. It’s clear that a large portion of the market is currently underserved by financial professionals, and producers who make an effort to court these potential clients have the opportunity to expand their business significantly.
Some affluent individuals go it alone
Deloitte discovered the number of people who believe they are prepared for retirement increased substantially over the past two years. When the Center for Financial Services first conducted the survey in 2012, just 28 percent of respondents said they felt very secure about their retirement plan. Now that number sits at 45 percent.
That jump is positive news for the economy overall, and indicates that people’s pocketbooks recovered from the economic downturn that cut into most consumers’ savings at the end of the last decade. Still, the majority of consumers remain at least a bit insecure about their financial plan for the future, and many probably don’t realize all of the options that are available to them. Financial professionals provide an essential service to these individuals, and can illuminate key points, such as how life insurance can be used to preserve wealth in retirement. Unfortunately, many wealthy people ignore this aid.
The high net worth people who eschewed guidance mainly did so because they felt they were able to manage their finances better than a professional. These consumers are actually excellent potential clients for financial professionals, as whatever confidence they feel could be enhanced with a comprehensive financial strategy.
Confidence, potential misplaced
These wealthy clients seem to be suffering from a sense of complacency common to some baby boomers and members of Generation X. Generations Apart, a study from life insurance provider Allianz, discovered the majority of people in these generations have a feeling that “everything is going to work out.” While that’s truer for the affluent members of these generations, that sort of complacency is still an issue. Wealthy consumers who fail to speak with financial professionals are unlikely to suffer in retirement, but may not be able to pass on as much money as they wanted to future generations.
It’s clear that working with a financial professional does offer increased peace of mind. Deloitte found that people who currently work with financial professionals trust them more than they did in the past, and financial professionals sensed that improved relationship.
More importantly, the clients who had a set plan for their financial future were more than twice as likely to feel confident about their money than the clients who were proceeding without a strategy. Financial professionals can use this sense to build their client base.
Speaking with ThinkAdvisor, Deloitte’s investment management research leader Sean Cunniff noted a “portion of the population that was extremely well off – high income, high asset. Those people don’t have to have a plan if they’ve got a lot of wealth; they’re probably going to be OK.”
While it’s true that these consumers can get by without financial professionals, their wealth’s security can be enhanced by a strong financial plan. Insurance producers need to communicate the value their services provide to build trust with these potential clients.