Clients loyal to their advisers

Wealthy investors are less likely to be loyal to a brokerage firm than they are to an adviser with whom they have developed a strong relationship, according to a national study of 4,000 affluent Americans released today by Cambridge, Mass.-based market research firm Cogent Research LLC.
In fact, loyalty to a single brokerage firm weakens as investors’ wealth increases, “Investor Brandscape: 2007” found. The study is based on an online survey of investors with at least $100,000 in investible assets conducted in October and November 2006.
While 39% of investors with less than $500,000 in assets are loyal to only one firm, only 31% of those with more than $500,000 have only one brokerage firm relationship.
Only 30% of investors with $100,000 to $500,000 in investible assets work with three or more brokerage firms, but 38% of those with $500,000 to $2 million in assets work with that number of brokers. Forty-four percent of those with more than $2 million in assets work with multiple brokers.
Sixty-four percent of affluent investors work with a financial adviser, and most of that group said they would be likely to follow their adviser to a new firm.
“This is good news for advisers, but not for the brokerage firms for which they work,” said Chris Brown, managing director of the wealth management practice at Cogent Research in a press release.
“All firms need to be working to keep advisers satisfied in the areas of compensation, product and service breadth, and home office support, or else risk significant client defections,” said Mr. Brown.
To strengthen client loyalty with firms, brokerages must improve communications concerning investment fees to convince investors of the value of what they are purchasing, he said. The study found that a leading driver of investor loyalty is fees and expenses on investments, and that is a leading cause of terminated brokerage relationships as well.