Brokers, planners face image problem

Despite the best efforts of broker-dealers and investment advisory firms, many well-off investors don’t think of their brokers or financial planners as financial advisers.

In a recent survey of investors with assets of at least $500,000, 40% said they either didn’t use an adviser or didn’t know if they had one. The rest said they used one or more financial advisers.

“I think this industry has gotten lost in its jargon,” says Stephen Gresham, executive vice president with the private-client group of Phoenix In- vestment Partners Ltd. in Hartford, Conn.

“Telling people that you’re a broker, an adviser, a planner, a vice president – nobody cares,” he says.

no relationship

Two years of a crushing bear market has exhausted many brokers and planners, leaving some at a loss for figuring out a strategy to gain the confidence of wealthy clients, industry observers say.

The problem, according to Cindy Gerhard, managing director and head of marketing for JPMorgan Funds in New York, is that many rich investors “don’t consider brokers their advisers.”

They usually have accounts at brokerage firms but don’t have a relationship with an adviser at the firm, according to the report. In fact, 43% of respondents said they didn’t use an adviser, even though they had an account at a national, full-service brokerage firm.

The message for brokers, then, Ms. Gerhard says, is they “should look beyond the dollars in the account and look more broadly” at a client’s variety of assets, including deferred compensation, the family business or retirement plans such as 401(k)s.

Indeed, brokers who take a comprehensive view of their clients’ assets are more likely to handle more of their money, according to the survey.

Clients give 26% more of their investible assets to them to manage because they are happy with advisers who take a comprehensive approach, according to the report.

Phoenix’s Mr. Gresham says one Florida-based broker has successfully influenced wealthy clients to view her as a financial adviser by telling them her job is to get them “financially organized.”

Brokers and planners need to ask clients what they are most concerned about and start dealing with that, Mr. Gresham says.

The No. 1 fear facing investors is quality of life during retirement, Mr. Gresham says. But a broker asking about a client’s concerns and worries needs to have a legitimate solution to the problem.

“This level of social interaction is very difficult for people selling hopes and dreams” – the holdovers from the bull market, Mr. Gresham says.

Finally, brokers have to approach clients with conviction, he adds.

“I can’t say it any other way. That’s the thing, right now, that stands between success and failure,” Mr. Gresham stresses.

Still, he notes that “to not have an adviser is not unusual.”

During the bull market, many investors, particularly baby boomers, decided to go it alone and used discount brokers such as San Francisco-based Charles Schwab & Co. Inc.

According to the study, 13% of respondents said they invest through an independent financial planner, while 53% said they invest in no-load mutual funds.

Opportunities do exist, says Mr. Gresham, but only if an adviser “is willing to take on the challenge of both sides of the balance sheet. That’s a lot of stuff to take care of, and it doesn’t come naturally to people who sell investment ideas.”

He points to the success of Merrill Lynch & Co. Inc.’s mortgage sales via brokers as one strategy firms can use to get brokers to look at a client’s overall financial profile. Such strategies move clients and brokers from speaking only about the performance of investments.

The study was conducted last fall by New York-based market research group SRBI Inc. for JPMorgan Fleming Asset Management, also of New York. It surveyed 500 households with a minimum of $500,000 in assets excluding primary residences.