Loyalty Of Affluent Clients Is Shifting, Says New Report

by Carla Johnson, Investors Offshore.com

28 June 2001

According to a new report by Spectrem Group, an NFO WorldGroup Company specialising in the affluent and retirement markets, the loyalty of wealthy clients to their financial service providers is undergoing a dramatic shift.

The report says that the latest trend for high net worth investors, encouraged by the emergence of Internet-enabled information and transaction tools, is to move away from their traditional loyalties to align themselves with advisors and "open architecture" platforms on which they can manage their own finances. Laurie Cochran, a Spectrem Director and co-author of the report, "Is Client Loyalty Dead? Meeting the Needs of Affluent Investors in the Age of Aggregation," argues that there are three key trends driving this change: the impact of the Internet, the movement toward open architecture and the increased role of independent advisors.

Ms Cochran said: 'The Internet has provided investors with access to a vast array of previously unavailable financial information, increasing their knowledge and boosting their investing confidence. It has also changed the way many affluent households manage their finances, providing 24/7 information and transaction capabilities.' As for open architecture, she notes that affluent investors today are demanding access to a variety of investment products and services from many sources.

'We believe that investors are comfortable receiving all their financial information from one source, but they do not want all of their investments to be in the products of one company. With the emergence of open platforms like online brokerage accounts, Schwab's One Source and new account aggregation services, investors now have the ability to satisfy those goals,' she added.

Finally, said Cochran, more and more affluent households are turning to independent advisors to assist them in managing their finances. She stated: 'Today, over one-third of affluent investors consider an independent advisor, such as a Registered Investment Advisor or Certified Financial Planner, to be their primary financial advisor, equaling the number of affluent who use a full service broker in this capacity.'

She noted: 'When choosing an advisor, affluent households first look at the name and reputation of the advisor, rather than the name of the company the advisor works for.' According to Ms Cochran, an open architecture platform is critical, 'because most advisors prefer access to a wide array of products and services from multiple providers, enabling them to maintain objectivity and select the best-in-class product or service for the client.'

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