Wealthy Investors No Longer Content With a Single Financial Advisor

While many middle-income consumers do without a financial adviser, wealthier Americans are increasingly working with multiple financial advisors, pitting them against each other.

Why? It's not just because they're looking for higher returns, says research from Cerulli Associates, but also because wealthier investors know it's important to diversify. Diversification has always been a key investment strategy and in the wake of the Madoff and similar scandals, many investors have decided that diversifying advisors also makes sense.

The Cerulli study found that 57% of U.S. households with at least $10 million in investible assets are working with five or more financial advisors – a huge jump from 2008, when just 16% of wealthy households had four or more advisers.

“Clients have become more worried about whether their assets are safe, and they don't want to place all of their assets with one adviser,” said Cerulli senior analyst Katharine Wolf, interviewed by Investment News. “These wealthier clients started looking for second and third opinions, and they will sometimes use small amounts of money to try out a new adviser.”

While worried about safety on the one hand, wealthy investors haven't stopped looking for big returns. The overwhelming majority – about two out of three wealthy households – are looking for annual returns fo 15% or more, the study found.

The study is a warning to the few financial advisors who may still be taking their clients for granted. As the complexity of the global economy increases, clients expect more personal and more frequent service. The households studied had more than 13 in-person meetings with their primary financial advisor plus 36 phone conversations.

Personal finance experts and investigative journalists alike will tell you it's always wise to “follow the money” – so if the wealthy think one financial advisor isn't enough, middle-income consumers who have none at all might want to rethink their strategy.

A good place to start is Fred Yager's recent article, Finding a Good Financial Advisor.