Affluent are more worried than advisers over economy

More expect to wait a considerable time for sustainable growth

Feb 1, 2009 @ 12:01 am

By Lisa Shidler

Advisers are more optimistic about the financial crisis than high-net-worth investors, according to a recent study. The Phoenix Cos. Inc. of Hartford, Conn., conducted an online survey of 200 high-net-worth investors with at least $1 million in investible assets, and 200 advisers in November. "We're seeing that consumers are expressing more concern with the financial issue than advisers," said Walter Zultowski, a senior vice president with The Phoenix. "High-net-worth consumers are bearish, but it provides a contrast with how advisers are viewing their clients."

When asked how concerned they are about the financial crisis, on a scale of one to five, 83% of the investors chose either a four or five, with five being the most concerned. By comparison, 71% of the advisers answered in the same way.

When asked when they thought equity markets would return to more sustainable growth trends, 17% of consumers said it would happen within 12 months or less. Some 41% of advisers thought the same thing. And 40% of advisers thought it would take 13 to 24 months, as compared to 43% of consumers. Of the advisers, 19% thought it would take longer than 25 months, and 40% of consumers believed the same.

"For advisers, it's just their job to be more optimistic. You could say these advisers have more experience with financial markets than their customers," Mr. Zultowski said. "But they need to understand where their clients are coming from, and even their high-net-worth clients are pretty concerned. They need to recognize it. They may not agree with them, but they need to understand."

The study also showed that 40% of high-net-worth investors were navigating this economic crisis without an adviser. Of the 60% of investors who did get help from an adviser, 27% said they initiated the phone call.

"Now's the time to be talking with your clients," Mr. Zultowski said.

Even though advisers may be more confident about the economy than their clients, communicating that effectively is one of the most important things advisers can do, said Diane Park, an adviser and certified financial planner with Wade Financial Group Inc. in Minneapolis, whose firm manages about $185 million in assets.

"We try to do such a good job of being proactive with communication, and that's the key," she said. "We do mass e-mails, print correspondence, plus we hold quarterly investment seminars, and that really helps."

Ms. Park said that at the seminars, clients get to address many of their concerns. Her firm also meets with clients twice a year to review their portfolios.

Letting your clients know that you won't be making panicky decisions is crucial, said Nicholas Yrizarry, an adviser with Nicholas Yrizarry & Associates LLC of Reston, Va., whicht manages $87 million in assets.

"As an adviser, my responsibility to my clients is to maintain a non-emotional objective distance from their money in order to help them make decisions that are non-emotional, despite the fact we're in a very emotional time."

Mr. Yrizarry noted the importance of showing clients his decisions about their finances and retirement accounts are based on sound research and in-depth analysis.

"I don't allow them to make decisions without thought and analysis," he said. "We can make objective decisions for them so they don't make irrational decisions."

High-net-worth clients may also be more concerned about the financial crisis than advisers because of the recent Ponzi scheme allegations against Bernard Madoff of Bernard L. Madoff Investment Securities LLC of New York, said Diane Young, president of the Athena Group Ltd., a Rochester, Mich., firm that manages about $20 million in assets.

Investors wonder if their adviser is trustworthy, she said. "They're looking at you and saying, 'how do I know you're not a Bernie Madoff?'" Ms. Young said. "The client wants to believe you, but their faith is shaken."

That's why it's important more than ever to talk to clients and explain the process for managing and investing money, Ms. Young said.

"I'm finding that most of our clients are upset, but they're not upset with me as an adviser," she said. "They're just mad at the economy."

E-mail Lisa Shidler at


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