The affluent investor: Insights and opportunities for advisors

Vanguard partnered with Spectrem Group, a premier research firm, to provide insights into the current attitudes and investment behaviours of affluent U.S. investors.

Our research found that advisors can increase client satisfaction by understanding clients' expectations, specifically, their financial circumstances, communication preferences and next-generation heirs.

Who are the affluent?

28.40millionhouseholds

8.36millionhouseholds

1.24millionhouseholds

Mass affluent Millionaire Ultra-high-net-worth

Net worth between$100,000 and $1 million

Net worth between$1 million and $5 million

Net worth between$5 million and $25 million

Five key findings and action steps

Affluent investors manage roughly half of all their assets.

Advisors manage fewer assets than you think

Assets the affluent control with no professional help

Assets clients consult with an advisor about, but manage on their own

Advisor-controlled Advisor-controlled Advisor-controlled

Have in-depth discussions with clients to ensure you have a complete picture of their assets. Look for gaps in your knowledge that reveal valuable opportunities.

59% 46% 48%26%

15%

38%

16%

33%

18%

1

2

Percentage who are not willing to invest outside the United States

74% 74%

58% 56%49%

43%

2013 2014 2013 2014 2013 2014

Global instability is a prevalent concern among affluent investors and is evidenced through their strong aversion to global investing.

Headlines shaping financial concerns

Note: This includes all investable assets, including defined contribution plans, IRAs, etc. Figures may not total 100% because of rounding.

ACTION STEP

ACTION STEP Educate clients on the benefits of global diversification. Make them aware of the risks in only holding domestic securities in their portfolios.

Planning for long-term care

Creating an estate plan

Implementing tax-advantaged strategies

Good for your practice

3

4

Creating a written financial plan

Establishing sufficient cash flow

Establishing an investment plan

Evaluating insurance to determine appropriate coverage

Selecting alternative investments

Planning for retirement

Diversifying assets

Selecting individual stocks and bonds

Exercising stock options

tie

When affluent investors rank the services they plan to seek in the future,three clearly stand out. Yet, these topics are largely overlooked by advisors.

What services do clients expect from advisors?

3

2

1

6

5

4

9

8

6

12

11

10

3

2

1

5

7

5

9

7

4

11

11

10

3

2

1

6

10

8

10

4

5

12

8

6

59% 61% 63%

49% 53% 50%

48% 48% 49%

45% 46% 54%

32% 36% 32%

Four of the top five factors that cause affluent investors to leave an advisor are communication-related. Are you focusing your efforts on things that matter the most to your clients?

Communication trumps performance

Initiate client conversations that help them anticipate future needs. Recognize they may be reluctant to bring up certain topics on their own.

ACTION STEP

You only have 24 hours in each day. Investment tools, such as the use of model portfolios, can free up time. This will help you be more accessible to clients so you can get to know them on a more personal level, which is something clients value.

ACTION STEP

Not returning phone calls in a timely manner

Not being proactive in communicating

Not giving good ideas and advice

Not returning emails in a timely manner

Underperformance compared with market

The bottom line

All investments are subject to risk, which may result in the loss of principal.

Source: Spectrem Group 2013–2014.

Each quarter, Spectrem Group conducts online interviews with affluent households across the United States. The survey includes about 1,500 mass affluent households, 1,000 millionaire households and 500 ultra-high-net-worth households. The research presented in the publication was conducted over a yearlong period from the fourth quarter of 2013 through the third quarter of 2014. Respondents were qualified based on the aggregate total of the household’s indicated net worth. The surveys were completed by the individual primarily responsible for making the day-to-day financial decisions the household. This sample would have an estimated margin of error of 5 per cent, 1 time out of 20.

This communication is solely for informational purposes, and is not a recommendation, offer or solicitation to buy or sell any ETFs or to adopt any investment or portfolio strategy. This material is not intended to be relied upon as research, investment, financial, legal, accounting, tax, practice and/or other advice. Please consult with your advisors before acting on any information in this material. All survey information is as of the date indicated. If surveyed again, respondents may answer differently.

Vanguard Investments Canada Inc. has not taken any additional steps to update, verify or interpret survey information. This material contains only selected highlights of the survey and is not the complete survey.

© 2015 Vanguard Investments Canada Inc. All rights reserved.

You can access the entire The affluent investor: Insights and opportunities report by visiting our website.

For a full analysis of our findings

Connect with Vanguard™ > vanguardcanada.ca > 888.293.6728

5

20% all ages

of young mass affluent

of young mass affluent

43%

30% all ages

57%

20% all ages

of young millionaires

of young millionaires

44%

26% all ages

44%

Investors age 35 and younger tend to be more confident and independent than their older counterparts. They want to see evidence that you’re doing something they can’t do.

Connect with the next generation

When interacting with younger prospects, be sure to respect their confidence in their own abilities. Be less of an authoritarian and more of a partner; offer your services as a complement.

ACTION STEP

Young investors with a portion of their investments with an advisor to compare results with their own investments

Young investors making financial decisions without the assistance of a financial advisor