ADVISOR AUTHORITY 2018 - Nationwide Advisory Solutions · 2018-12-12 · ADVISOR AUTHORITY 2018: The Future of Advice Chapter 3 – Winning The High Net Worth: Unlock Greater Growth

The Innovation and Issues that RIAs, Fee-Based Advisors and Investors Care About Most

AdvisorAuthority

ADVISOR AUTHORITY 2018

CHAPTER 3WINNING THE HIGHNET WORTH:Unlock Greater Growth ServingMore Affluent Investors

Advisor Authority Report

AdvisorAuthority

ADVISOR AUTHORITY 2018: The Future of Advice Chapter 3 – Winning The High Net Worth: Unlock Greater Growth Serving More Affluent Investors

LETTER FROM CRAIG HAWLEY, HEAD OF NATIONWIDE ADVISORY SOLUTIONS

DEMOGRAPHICS AND METHODOLOGY:

Key Demographics of RIAs and Fee-Based Advisors

Key Demographics of All Investors

HOW TO USE THIS REPORT:

Two Segments of More Affluent Investors

WINNING THE HIGH NET WORTH: UNLOCK GREATER GROWTH SERVING MORE AFFLUENT INVESTORS

Executive Summary

Winning the HNW: The Opportunity is Huge—and Growing

Advisors Can Give More Affluent Investors More Confidence

Attracting More Affluent Investors: Top Factors

With Greater Wealth Comes Greater Complexity

The More Affluent Demand Sophisticated Strategies and Solutions

Politics and Policies Impact More Affluent Investors

Bridging the AI Divide

3

4

CONTENTS:

11

12

10

14

16

6

7

8

9

2


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ADVISOR AUTHORITY: The Innovation and Issues that RIAs, Fee-Based Advisors and Investors Care About Most

Letter from Craig Hawley, Head of Nationwide Advisory Solutions

To help all advisors at every level tap into the tremendous potential of the independent fee-based channel, our 2018 Advisor Authority study, now in its fourth year, explores the issues and innovative solutions that matter most to RIAs, fee-based advisors and their clients.

In this latest Advisor Authority Special Report, we zero in on the High Net Worth (HNW) and the Ultra High Net Worth (Ultra HNW). These valuable and sophisticated clients are continuing to thrive and grow around the world, and especially in the U.S. By positioning your practice to help these more affluent investors build more wealth, you also position your practice for greater growth—and greater success. We will help you better understand the priorities, preferences and concerns, as well as help you position your practice to meet their unique needs. And as the HNW ascend to the ranks of the Ultra HNW, we can help you understand how their priorities, preferences and concerns may change.

In a year of the unexpected and the unprecedented, we have already uncovered several important trends to help you understand your clients and position your practice for greater growth. As lawmakers continue to dominate the headlines, our study has shown how the most dramatic tax reform package in nearly three decades is impacting advisors and their clients, and the proactive measures they are taking to ensure success. Our findings have also revealed where investors and advisors are aligned on a unified fiduciary standard, and the benefits of putting clients’ best interests first. We’ve explored how you can gain a competitive advantage by harnessing the benefits of Artificial Intelligence (AI). To help you engineer your own path to success, we’ve studied ten traits of highly successful advisors.

Nationwide Advisory Solutions got its start as Jefferson National, a company built from the ground up with a singular focus on serving RIAs and fee-based advisors. We believe in the tremendous potential of the fee-based channel to drive new innovation, disrupt the status quo and transform the future of our industry. We have never stopped in our efforts to develop a deeper understanding of the challenges you face—and the solutions that you need to succeed. We will continue taking the pulse of RIAs, fee-based advisors and their clients, to establish benchmarks and provide you with the actionable insights that are so important for your success.

We believe you’ll find our research insightful. As always, we welcome your feedback about our findings and your suggestions for next year’s study.

Sincerely,

Craig Hawley


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29%

44%

9%

15%

23%

54%

23%

ADVISOR TYPE

■ Independent RIA ■ Broker Dealer Registered Representative ■ Dually Registered

48%

43%

9%

TITLE

■ Owner or part -owner■ Management■ Non-management

23%

22%27%

23%PERSONAL

INCOME

■ Less than $100,000■ $100,000-$149,999■ $150,000-$249,999■ $250,000 or more■ Decline to Answer

ROLE

■ Investment planner■ Financial planner■ Asset manager■ Wealth manager■ Other

Gender

Total AUM Managed (Individually)

Male

Age

67% 45%

Generation X (38-53)

Millennial(18-37)

32%

Baby Boomer (54-72)

22%

Matures (73+)

1%

Female33%

%14 Less than $25 million

24% $25 to less than $50 million



11% $250 million or more

6% 3%

Demographics & Methodology

This is our fourth annual Advisor Authority study on the issues and innovative solutions that RIAs and fee-based advisors care about most. It was conceived as a tool that takes the pulse of RIAs and fee-based advisors of all sizes and at every level of experience, to establish benchmarks that you can use to measure your progress relative to your peers—as well as to learn from recognized leaders and industry innovators. As in previous years, we will publish a series of ongoing Special Reports that will be released from now through year-end 2018.

Conducted on behalf of Nationwide’s Advisory Solutions by The Harris Poll, a leading independent market research firm, the online survey was fielded from January 3 – February 21, 2018 using a sample from the Harris Poll Panel of Financial Advisors and Investors and its partners. It reflects the viewpoints of more than 1,700 financial advisors and individual investors who reside in the U.S. This year’s study includes 972 advisors in total. Among these respondents, we survey a “trended group” of 760 RIAs and fee-based advisors, who meet the same qualification criteria as in prior years of our Advisor Authority research and will continue to be the primary focus in this year’s series of Special Reports.

“Trended” RIAs and Fee-Based Advisors


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Gender

Household Investable AssetsFinancial Decision Maker

Advisor Relationship Status

Male

Among the 827 Investors, we surveyed:

Age

53%

Joint Financial Decision Maker

41%

Primary Financial Decision Maker

59%

Do not have a financial advisor

40%

Have a financial advisor

60%

25%

Generation X (38-53)

Millennial(18-37)

Mass Affluent

21

208Emerging High Net Worth

206High Net Worth 208

Ultra High Net Worth

205

%

Baby Boomer(54-72)

42%

Matures (73+)

12%

Female47%

%58Mass Affluent $100,000 to less than $500,000

18%

Emerging HNW $500,000 to less than $1 Million

14%

HNW $1 Million to less than $5 Million

10%

Ultra HNW $5 Million or more

$

$

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 in order to bring them in line with their actual proportions in the population.


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HOW TO USE THIS SPECIAL REPORTAdvisor Authority was conceived as a tool that takes the pulse of RIAs and fee-based advisors of all sizes and at every level of experience, to provide actionable insights and establish benchmarks that you can use to measure your own progress relative to your peers, leaders and industry innovators.

We also study investors, defined as primary/shared decision makers with investable assets greater than $100,000, ranging from the Mass Affluent to the Ultra HNW, of every generation from Millennials to Matures. Their responses can help you understand where advisors and investors align, where they don’t—and the opportunities that emerge as a result.

Two Segments of More Affluent Investors:Throughout this Special Report, we look closely at two segments of more affluent investors—the HNW and Ultra HNW—what’s on their mind, what’s keeping them up at night, and what they want when working with an advisor.

The High Net Worth Investor (HNW): Individuals who have investable financial assets ranging from $1 million to less than $5 million.

The Ultra High Net Worth Investor (Ultra HNW): Individuals who have investable financial assets of $5 million or more.


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EXECUTIVE SUMMARY

More affluent investors are poised for growth. By helping them build more wealth, RIAs and fee-based advisors can drive greater growth—and greater success

The HNW and Ultra HNW are an ideal target for RIAs and fee-based advisors. Poised for growth, their ranks are expanding and their wealth is increasing. But more affluent investors have unique needs—and face unique risks—that advisors must understand in order to build trusted relationships. This latest Advisor Authority Special Report will help you better understand the priorities, preferences and concerns of this valuable client segment. And as your HNW clients ascend to the ranks of the Ultra HNW, this report highlights how their priorities, preferences and concerns may shift. By positioning your practice to help more affluent investors build more wealth, you also position your practice for greater growth—and greater success.

WINNING THE HNW: THE OPPORTUNITY IS HUGE—AND GROWINGWhile the HNW/Ultra HNW are the most likely to work with financial advisors, many more affluent investors have not tapped into this vital resource—presenting a huge opportunity for the RIAs and fee-based advisors who dedicate the effort to learning more about these sophisticated clients.

ADVISORS CAN GIVE MORE AFFLUENT INVESTORS MORE CONFIDENCE The HNW/Ultra HNW say by a wide margin that their primary reason for having a financial advisor is to feel more confident in their financial future. With complex financial lives and unique needs, more affluent investors have a clear need for holistic advice.

ATTRACTING MORE AFFLUENT INVESTORS: TOP FACTORS The HNW/Ultra HNW seek an experienced advisor, personalized advice for a holistic financial plan, and a fiduciary standard that puts their best interest first. This year’s study also shows that more affluent investors are more likely to believe there should be one federal fiduciary standard industry-wide.

WITH GREATER WEALTH COMES GREATER COMPLEXITYThe HNW/Ultra HNW have substantially more wealth, but this does not always translate into substantially greater optimism about their financial outlook. More wealth means they have more to lose—whether through market risk or through higher taxes.

THE MORE AFFLUENT DEMAND SOPHISTICATED STRATEGIES AND SOLUTIONSMore focused on protecting assets, more affluent investors are far more likely to have a proactive strategy against market risk—and the Ultra HNW are far more likely to use fixed index annuities, market-linked CDs, and smart beta ETFs as a solution. The more affluent are also far more likely to have a strategy to protect against outliving their savings—and the Ultra HNW are far more likely to use income generating annuities and longevity insurance as a solution.

POLITICS AND POLICIES IMPACT MORE AFFLUENT INVESTORS Lawmakers at home and abroad continue to dominate the headlines—and remain top of mind for more affluent investors. While gridlock in Washington may pose threats to their portfolios, the Ultra HNW are also far more likely to say they will benefit from tax reform—and far more likely to say tax reform will increase the likelihood they’ll work with an advisor.

BRIDGING THE AI DIVIDEMore affluent investors agree that Artificial Intelligence can help advisors meet their complex needs and provide more sophisticated solutions. But when it comes to comfort level, the Ultra HNW are clearly on one side of the AI Divide, while the HNW are squarely on the other.


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WINNING THE HNW: THE OPPORTUNITY IS HUGE—AND GROWING

Driven by robust equity returns, brisk economic performance and rising investor confidence, the world’s HNW saw their total wealth grow 10.6 percent in 2017, to reach a record $70.2 trillion worldwide, according to the Capgemini World Wealth Report 2018. Likewise, the number of HNW investors—which Capgemini defines as those having investable assets of $1 million or more—has reached 18.1 million individuals worldwide.

The U.S. continues to be home to the largest number of HNW investors holding the greatest amount of wealth in the world. In 2017, the number of U.S. HNW investors increased 10 percent to 5.3 million individuals, and their total wealth increased 10.5 percent, to $18.6 trillion. According to Advisor Authority, these more affluent investors are far more likely to have an advisor as compared to the typical investor (71% HNW and 74% Ultra HNW vs 60% All Investors).

Yet more than one-fourth of these more affluent investors are going it alone (29% HNW and 26% Ultra HNW). While our findings suggest that one reason more affluent investors do not have a financial advisor may be their preference to manage their own assets, they could clearly benefit from holistic planning and guided advice to build more wealth—and manage the complexities that come with it. For the RIAs and fee-based advisors who dedicate the effort to understand this lucrative and sophisticated client segment, this presents a tremendous opportunity for greater growth and greater success.

HIGH NET WORTH ULTRA HIGH NET WORTH

71%YES

74%YES

ALL INVESTORS

60%YES

HIGH NET WORTH UTLRA HIGH NET WORTH ALL INVESTORS

DO YOU HAVE AN ADVISOR?

https://www.capgemini.com/service/world-wealth-report-2018/


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ADVISORS CAN GIVE MORE AFFLUENT INVESTORS MORE CONFIDENCE Year-over-year, more affluent investors say that their primary reason for having a financial advisor is to feel more confident in their financial future. In this year’s study, all investors including the most affluent rated this factor number-one by a wide margin (39% HNW, 38% Ultra HNW, 36% All Investors).

At the same time, more affluent investors have complex financial lives and unique needs. Whereas the typical investor is more likely to seek advice to help them save enough for retirement (16%), the HNW are somewhat more likely than the typical investor to seek advice because financial planning is a focus (15%) but they lack confidence in managing their own assets (11%) and they lack the time to manage their own finances (11%). The Ultra HNW are more likely than the typical investor to seek advice for leaving a financial legacy (12%) and for help managing their taxes (9%)—needs which are identified throughout this year’s study.

I feel more confident in my financial future

Financial planning is a focus of mine at this time

I do not feel confident that I can manage my own finances

I don't have time to manage my own finances

I am focused on leaving a financial legacy

I am concerned about saving enough for retirement

My family member, friend, or colleague referred me to an advisor

I need help managing my taxes

Other 7%

1%

4%

6%

6%

11%

11%

15%

39%

10%

9%

6%

8%

12%

2%

3%

10%

38%

6%

4%

8%

16%

3%

6%

7%

13%

36%

HIGH NET WORTH

UTLRA HIGH NET WORTH

ALLINVESTORS

MAIN REASON FOR HAVING AN ADVISOR


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ATTRACTING MORE AFFLUENT INVESTORS: TOP FACTORS

Year-over-year, more affluent investors’ top three factors for choosing an advisor include advisor experience, personalized advice for a holistic financial picture, and a fiduciary standard that puts clients’ best interest first.

When targeting the HNW and Ultra HNW, newer advisors should consider partnering with more experienced advisors and building multi-generational teams. To provide more personalized and holistic planning, consider partnerships with specialists such as CPAs, trust attorneys and estate planners.

To be consistent with a fiduciary standard, complete transparency of the fees charged and products used should be a top priority. In fact, this year’s study shows that more affluent investors are more likely than all investors to believe there should be one federal fiduciary standard across the financial industry (74% HNW and 80% Ultra HNW vs 68% All Investors).

This year’s study also shows that technology matters to the Ultra HNW. They are more likely to cite increased use of social media (18%) and robo advisors (12%) as reasons for choosing an advisor and nearly twice as likely to indicate mobile technology (16%) is a reason for choosing an advisor.

*All coded responses less than 2% are excluded from this table

TOP FACTORS WHEN CHOOSING AN ADVISOR

Advisor experience/years of experience

Personalized advice for a holistic financial picture

Serve clients using a fee-based fiduciary standard, instead of commission-based sales model

Highlighting historical performance

Socially responsible investing

Increased use of mobile technology

Additional strategies for charitable giving

Working more with a client's family and children

Hiring advisors of all age groups, including younger advisors

Robust cyber security procedures

Reducing fees for younger clients

Leveraging Robo Advisors or other digital portfolio allocation tools

Increased use of social media

Enhancements to current website and/or client portal

None

50%

31%

29%

15%

11%

8%

7%

6%

6%

5%

5%

4%

3%

2%

8%

38%

20%

24%

17%

13%

16%

7%

14%

6%

13%

8%

12%

18%

5%

3%

48%

23%

23%

19%

14%

9%

4%

10%

5%

9%

11%

4%

6%

5%

6%

Top Factors When Choosing An Advisor

High Net Worth Ultra High Net Worth All Investors

3

Advisor experience/years of experience

Personalized advice for a holistic financial picture

Serve clients using a fee-based fiduciary standard, instead of commission-based sales model

Highlighting historical performance

Socially responsible investing

Increased use of mobile technology

Additional strategies for charitable giving

Working more with a client's family and children

Hiring advisors of all age groups, including younger advisors

Robust cyber security procedures

Reducing fees for younger clients

Leveraging Robo Advisors or other digital portfolio allocation tools

Increased use of social media

Enhancements to current website and/or client portal

None

50%

31%

29%

15%

11%

8%

7%

6%

6%

5%

5%

4%

3%

2%

8%

38%

20%

24%

17%

13%

16%

7%

14%

6%

13%

8%

12%

18%

5%

3%

48%

23%

23%

19%

14%

9%

4%

10%

5%

9%

11%

4%

6%

5%

6%

Top Factors When Choosing An Advisor

High Net Worth Ultra High Net Worth All Investors

Base: Qualified Investors: High Net Worth (n=208); Ultra High Net Worth (n=205); Total Investors (n=827) Q930. Which of the following would make you more likely to work/influenced you to work with a financial advisor? Please select up to three.



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WITH GREATER WEALTH COMES GREATER COMPLEXITY

More affluent investors have substantially more wealth, but this does not always translate into substantially greater optimism about their financial outlook. When asked their financial outlook for 2018, the HNW are somewhat more optimistic (65%)—while the Ultra HNW are somewhat less optimistic (58%)— compared to all investors (62%).

More wealth means they have more to lose. While protecting assets is a top concern for investors at every level, it is especially important to the HNW. Year-over-year they say it is their number-one concern by a wide margin (45% in 2018, 41% in 2017 and 41% in 2016). This year, taxes rose to the number-one concern for the Ultra HNW (42% in 2018), while protecting assets was their number-one concern in prior years (40% in 2017 and 33% in 2016). Year-over-year, the cost of healthcare also remains a leading concern for investors, regardless of their net worth. In 2018 it was rated second by the HNW (35%), fourth by the Ultra HNW (21%) and number-one by all investors (33%).

More affluent investors have a greater need for holistic advice to confront the unique concerns and complex challenges they face. Based on our findings, RIAs and fee-based advisors may need to do an alignment check to ensure that they are in sync with their more affluent clients. Whereas the typical investor is more concerned about saving for retirement (21%) and managing debt (19%), more affluent investors are more concerned about managing volatility (28% HNW and 22% Ultra HNW) and transferring wealth to heirs (13% HNW and 10% Ultra HNW). .

TOP FINANCIAL CONCERNS OVER NEXT 12 MONTHS

26%

25%

13%

12%

11%

5%

2%

2%

1%

<.5%

12%

10%

21%

13%

21%

1%

6%

2%

6%

4%

18%

19%

19%

13%

10%

3%

5%

2%

2%

4%

11%

19%

14%

13%

20%

NA

7%

2%

5%

4%

Top Macro Factors That Will Adversely Impact Portfolios In 2018

High Net Worth Ultra High Net Worth All Investors RIAs/Fee Based Advisors*All coded responses less than 2% are excluded from this table

4

Protecting assets

Cost of healthcare

Taxes

Managing volatility

Inflation

Generating reliable income during retirement

Saving enough for retirement

Transferring wealth to heirs

Charitable giving

Rising interest rates

Financing children’s education

Caring for aging parents

Managing debt

Financing another large expense, such as wedding/vehicle, etc.

Outliving retirement savings

Falling interest rates

Financing a home

45%

35%

31%

28%

18%

15%

13%

13%

13%

9%

9%

7%

7%

5%

4%

3%

1%

28%

21%

42%

22%

20%

10%

15%

10%

8%

17%

12%

9%

5%

6%

10%

6%

7%

31%

33%

31%

14%

17%

17%

21%

7%

6%

8%

9%

7%

19%

9%

7%

4%

7%

26%

32%

27%

23%

13%

21%

30%

7%

3%

22%

12%

9%

17%

7%

21%

6%

10%

Top Financial Concerns Over Next 12 Months

High Net Worth Ultra High Net Worth All Investors RIAs/Fee Based Advisors

Base: Qualified Respondents: High Net Worth (n=208); Ultra High Net Worth (n=205); Total Investors (n=827); RIAs/Fee-Based Advisors (n=760) Q810/Q815. In the next 12 months, what are your/your clients’ biggest financial concerns? Please select up to three.



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THE MORE AFFLUENT DEMAND SOPHISTICATED STRATEGIES AND SOLUTIONS

Given their greater focus on protecting assets, more affluent investors are far more likely to have a proactive strategy against market risk (79% HNW and 76% Ultra HNW vs 57% All Investors). Investors at every level rely on diversification as the foundation of risk management, as do the RIAs and fee-based advisors who serve them. Liquid alternatives are a popular solution across the board, as are fixed annuities. The Ultra HNW are far more likely to use fixed index annuities, market-linked CDs, and smart beta ETFs. RIAs and fee-based advisors also report using these methods.

SOLUTIONS TO PROTECT AGAINST MARKET RISK

26%

25%

13%

12%

11%

5%

2%

2%

1%

<.5%

12%

10%

21%

13%

21%

1%

6%

2%

6%

4%

18%

19%

19%

13%

10%

3%

5%

2%

2%

4%

11%

19%

14%

13%

20%

NA

7%

2%

5%

4%


High Net Worth Ultra High Net Worth All Investors RIAs/Fee Based Advisors*Other is excluded from this table

5

Diversification

Liquid Alternatives

Fixed Annuity

Non-Correlated Assets

Market-Linked CDs

Other Principal Protection Products

Fixed Index Annuity (FIA)

Put Options

Smart Beta ETF

78%

35%

27%

19%

16%

12%

11%

7%

6%

60%

44%

39%

26%

37%

15%

39%

27%

31%

66%

34%

29%

10%

20%

11%

22%

8%

7%

62%

40%

55%

34%

32%

14%

48%

19%

28%

Solutions To Protect Against Market Risk


Base: Qualified Respondents With A Strategy In Place To Protect Assets Against Market Risks: High Net Worth (n=160); Ultra High Net Worth (n=158); Total Investors (n=558); RIAs/Fee-Based Advisors (n=705) Q8015. Which of the following solutions do you use to help [your clients] protect their/your assets against market risks? Please select all that apply.

*Other is excluded from this table


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SOLUTIONS TO PROTECT AGAINST OUTLIVING SAVINGS

With greater accumulated wealth, the more affluent are also far more likely to have a strategy to protect against outliving their savings (85% HNW and 88% Ultra HNW vs 74% All Investors). Investors at every level rely on Social Security as the foundation for an income strategy, as do RIAs and fee-based advisors. The HNW and Ultra HNW are more likely to rely on dividend yielding stocks (67% HNW and 61% Ultra HNW). The Ultra HNW are far more likely to rely on a range of different income generating annuities (SPIA, QLAC and CDA) and longevity insurance. Likewise, RIAs and fee-based advisors also report using these methods, as well as saying they are more likely to rely on variable annuities with living benefits, bond ladders and a variety of yield generating ETFs.

26%

25%

13%

12%

11%

5%

2%

2%

1%

<.5%

12%

10%

21%

13%

21%

1%

6%

2%

6%

4%

18%

19%

19%

13%

10%

3%

5%

2%

2%

4%

11%

19%

14%

13%

20%

NA

7%

2%

5%

4%



6

Social Security

Dividend Yielding Stocks

Defined Benefit Plan/Pension

Yield Generating ETFs/Income Generating ETFs/Multi-Asset ETFs

Variable Annuity with living benefit riders (GMIB, GLWB, etc.)

Fixed Income Ladder/Bond Ladders

Single Premium Immediate Annuity (SPIA)

Longevity Insurance/Deferred Income Annuity (DIA)

Contingent Deferred Annuities (CDAs)

Qualifying Longevity Annuity Contract (QLAC)

Other

76%

67%

38%

26%

20%

19%

9%

7%

12%

10%

17%

58%

61%

42%

29%

28%

30%

37%

19%

14%

20%

8%

72%

48%

44%

16%

22%

15%

11%

11%

8%

6%

11%

61%

50%

41%

39%

56%

47%

39%

38%

25%

29%

3%

Solutions To Protect Against Outliving Savings


Base: Qualified Respondents With A Strategy In Place To Protect Assets Against Outliving Savings: High Net Worth (n=172); Ultra High Net Worth (n=180); Total Investors (n=663); RIAs/Fee-Based Advisors (n=706) Q8007. Which of the following solutions do you use to help protect yourself/your clients against outliving your/their savings? Please select all that apply.


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POLITICS AND POLICIES IMPACT MORE AFFLUENT INVESTORS

Lawmakers at home and abroad continue to dominate the headlines—and remain top of mind for more affluent investors. Advisors should address these factors when discussing investing strategies with their more affluent clients.

When it comes to the macro factors that will impact their portfolios in 2018, the HNW are far more likely to say that gridlock in Washington (26%) and global instability (25%) are the top two concerns, while the Ultra HNW say that taxes (21%) and rising interest rates (21%) are tied for number-one. RIAs and fee-based advisors are most focused on rising rates (20%), global instability (19%) and taxes (14%). Investors and advisors alike acknowledge that ongoing volatility could continue to pose a threat.

Our findings also show that a focus on tax planning and tax-efficient investing could help build more wealth for more affluent clients—and drive more growth for RIAs and fee-based advisors. The Ultra HNW are far more likely to say that they will benefit from tax reform (74% Ultra HNW vs 56% HNW and 56% All Investors). Likewise they are far more likely to say that tax reform will increase the likelihood that they will work with an advisor over the next 12 months (47% Ultra HNW vs 22% HNW and 28% All Investors).

26%

25%

13%

12%

11%

5%

2%

2%

1%

<.5%

12%

10%

21%

13%

21%

1%

6%

2%

6%

4%

18%

19%

19%

13%

10%

3%

5%

2%

2%

4%

11%

19%

14%

13%

20%

NA

7%

2%

5%

4%



TOP MACRO FACTORS THAT WILL ADVERSELY IMPACT PORTFOLIOS IN 2018


7

26%

25%

13%

12%

11%

5%

2%

2%

1%

<.5%

12%

10%

21%

13%

21%

1%

6%

2%

6%

4%

18%

19%

19%

13%

10%

3%

5%

2%

2%

4%

11%

19%

14%

13%

20%

NA

7%

2%

5%

4%



Gridlock in Washington

Global instability

Taxes

Ongoing volatility

Rising interest rates

Donald Trump (i.e., attitude, policies, presidency, etc.)

Falling dollar

Falling oil prices

Falling interest rates

Rising oil prices

Base: Qualified Respondents: High Net Worth (n=208); Ultra High Net Worth (n=205); Total Investors (n=827); RIAs/Fee-Based Advisors (n=760) Q845/850. Over the next 12 months, which macro issue do you believe will most adversely impact your [client’s] portfolio?



AdvisorAuthority


15

3% 3% 7%4% 7%8%

71%

43%

57%

22%

47%

28%

High NetWorth Ultra HighNet Worth AllInvestors

How Will Tax Reform Impact the Likelihood You Work With an Advisor?

Increase (Net)

Neither increase nordecrease

Decrease (Net)

Don't know/Not sure

High NetWorth

Ultra HighNet Worth

AllInvestors

WILL YOU BENEFIT FROM TAX REFORM?

56%AGREE

74%AGREE

56%AGREE

HIGH NET WORTH UTLRA HIGH NET WORTH ALL INVESTORS

HOW WILL TAX REFORM IMPACT THE LIKELIHOOD YOU WORK WITH AN ADVISOR?


AdvisorAuthority


16

6% 6% 7%2%

19%12%

26%

15%

50%

23%

43%

43%

25%

59%

23%

40%

High NetWorth Ultra HighNet Worth AllInvestors RIAs/Fee-BasedAdvisors

Are You Familiar with AI?

Extremely/VeryFamiliar (Net)

Somewhatfamiliar

Just know thephrase

Never heard of AI

High NetWorth

Ultra HighNet Worth

AllInvestors

RIAs/Fee-BasedAdvisors

BRIDGING THE AI DIVIDE

More affluent investors have more complex needs and demand more sophisticated solutions. And they agree that the top two ways Artificial Intelligence will help advisors better serve them is by engineering investing strategies for better returns (42% HNW and 40% Ultra HNW) and protecting assets against market risk (36% HNW and 34% Ultra HNW).

Yet this year’s study shows that more affluent investors have distinct comfort levels—with the Ultra HNW clearly on one side of the AI Divide, while the HNW and the typical investor are squarely on the other. The Ultra HNW are far more likely to be extremely or very familiar with AI (59% Ultra HNW vs 25% HNW and 23% All Investors), and among those at least somewhat familiar with AI, far more likely to be optimistic about the impact of AI on financial planning (56% Ultra HNW vs 38% HNW and 42% All Investors), as well as far more likely to agree that integrating AI with financial planning will improve the advisor/investor relationship (57% Ultra HNW vs 30% HNW and 42% All Investors).

As long as investors with a financial advisor place a premium on trust, face-to-face communication and a personal one-on-one relationship, AI is not likely to replace human advice. Time-starved more affluent investors say phone calls are preferred for ongoing communication with their advisor (39% Ultra HNW and 31% HNW). When advisors need to learn about more affluent clients’ expectations and needs, even the tech-savvy Ultra HNW agree that nothing compares to regular in-person meetings (39% Ultra HNW, 50% HNW). Finding the right balance between high tech and high touch is essential to meet more affluent clients’ demands for customized offerings, holistic planning—and putting their best interests first.

ARE YOU FAMILIAR WITH AI?


AdvisorAuthority


17

37%24%

37%18%

33%

20%

21%

16%

30%57%

42%66%


Will AI Improve the Advisor/Investor Relationship?

Yes

No

Don't know/Not sure

1% 2% 3% 3%

23%12%

18% 20%

37%

31%

36%21%

38%

56%42%

56%

High NetWorth Ultra HighNet Worth AllInvestors RIAs/Fee-Based Advisors

What is You Outlook on the Impact of AI?

Optimistic (Net)

Neutral

Pessimistic (Net)

Don't know/Not sure

High NetWorth

Ultra HighNet Worth

AllInvestors


WHAT IS YOU OUTLOOK ON THE IMPACT OF AI?

High NetWorth

Ultra HighNet Worth

AllInvestors


WILL AI IMPROVE THE ADVISOR/INVESTOR RELATIONSHIP?

37%24%

37%18%

33%

20%

21%

16%

30%57%

42%66%


Will AI Improve the Advisor/Investor Relationship?

Yes

No

Don't know/Not sure

AdvisorAuthority

MethodologyThe fourth annual Advisory Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide Advisory Solutions from January 3 – February 21, 2018 among 972 financial advisors and 827 investors, ages 18+. Among the 972 financial advisors, there were 508 Registered Investment Advisors and 464 Broker/Dealers. Included in this group of financial advisors is a new segment of 212 Wirehouse Broker/Dealers that is excluded from trended data to allow for year-over-year comparisons. Among the 827 investors, there were 208 Mass Affluent, 206 Emerging High Net Worth, 208 High Net Worth and 205 Ultra High Net Worth. 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.

Respondents for this survey were selected from among those who have agreed to participate in Harris Poll surveys. Because the sample is based on those who were invited to participate in the Harris Poll online research panel, no estimates of theoretical sampling error can be calculated.

Field Periods:

2018 January 3 – February 21

2017 March 13 – April 7

2016 March 3 – March 28

2015 April 13 – April 24

Reading the Data in this ReportResponses may not add up to 100% due to weighting, computer rounding, or the acceptance of multiple responses.

About The Harris PollThe 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.

About Nationwide Advisory SolutionsNationwide Advisory Solutions, formerly known as Jefferson National, is a recognized innovator with a mission to help RIAs and fee-based advisors build their practice by helping their clients to potentially accumulate more wealth and reach their financial goals. Nationwide Advisory Solutions does this by developing and delivering value-added investment products, services and technologies built from the ground up to fit the fiduciary standard—with more simplicity, transparency, choice and consumer value wrapped in an industry-leading customer experience. To

learn more, please visit www.nationwideadvisory.com

About NationwideNationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s. The company provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com.

Nationwide, Nationwide is on your side, the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company. © 2018

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Documents

ADVISOR AUTHORITY 2018 - Nationwide Advisory Solutions · 2018-12-12 · ADVISOR AUTHORITY 2018: The Future of Advice Chapter 3 – Winning The High Net Worth: Unlock Greater Growth