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I want to know about who uses wealth management and why. What is the average wealth, net worth and age of those who have financial advisors? For those who have personal financial advisors? I'm trying to understand the demographics of those who use traditional vs. non-traditional wealth management (i.e. going to see your financial advisor at his/her firm vs. logging into a wealth management app)
Hello! Thanks for your question about who uses wealth management and why, including the average age and net worth of those who have financial advisors and those who use wealth management and financial advisor apps. The short version is that 40% of those surveyed use a financial advisor of some kind, with wealth management being used in much higher rates by those earning over $100K, and less frequently by those under $50K. The average age of someone using a personal financial advisor is 62, and the average account size managed by an independent financial advisor was $78,469, and wealth management firms an average of $65,447. Millennials and lower income earners were most likely to use wealth management apps over personal wealth management services services, which was linked to their familiarity with technology and mobile financial services, desire to avoid high fees, and desire to be involved in their own finances on a daily basis. Below you will find a deep dive of my findings.
METHODOLOGY
In order to answer your query, I referenced consumer surveys on use of financial services, industry reports, and financial and business articles from various relevant media sources. Per your request, I compiled data on age, income, revenue, and other demographic trends in wealth management as related to both personal financial advising and mobile wealth management apps.
OVERVIEW
Across all demographics, the use of personal financial advisors has increased in the last five years. 40% of consumers surveyed in 2015 use a financial advisor compared to just 28% percent in 2010, much of which in contributed to higher confidence in the economy. 7 out of 10 of those using financial advisors worked with a Certified Financial Planner. Additionally of those surveyed, 41% noted that they believe that financial advising has become more important in the last five years, compared to just 12% that believe it is less important now than five years ago.
AVERAGE INCOME & INVESTMENT SIZE
When the use of a personal financial advisor was examined based on income, those who made over $100K were most likely to use wealth management services, with 67% of this income bracket using a financial planner or advisor. For low income earners, those below $50K only used financial advisors 22% of the time.
It is noted that the average investment and net worth of those using financial advising services is often underestimated, with the average independent financial advisor managing an account size of $78,469, and registered investment firms managed accounts with an average size of just $65,447. This of course varied for banks who take on large accounts, with the average account size of financial advisors at Morgan Stanley, Bank of America, and Merrill Lynch being estimated to be $425,944.
AGE & GENDER DEMOGRAPHICS
Use of wealth management services and financial advisors varied based on both age and gender. 42% of females surveyed used a personal advisor compared to just 37% of males.
The average age of a client for personal wealth management services is 62, much older than the overall population. This is related to data that shows half of investment assets are held by clients over 65, meaning many financial advisors and wealth management firms are primarily targeting clients in this age bracket.
However it is noted that younger clients under the age of 45 grow revenue nearly twice as quickly as those over 45 (14.1% to 7.7% increase per year). Thus there is anticipated to a be a rapid shift in wealth to younger generations, and successful wealth management providers will need to find ways to target younger earners.
WEALTH MANAGEMENT APPS & "ROBO ADVISORS"
Wealth management and financial apps are also referred to as "Robo Advisors". While 48% of wealthy millennials who earn over $100K want to use financial advisors, they note that they want to use them selectively and would rather be involved in daily management of finances and turn to online and mobile services for this reason.
Additionally, 57% over the age of 40 would consider leaving their current wealth management firm to have more digital options, and 80% under the age of 40 noted the same.
For those in the highest earning brackets, many prefer using a wealth management firm or personal advisor in combination with an app or digital services. For example, New York based wealth firm Betterment has 60% of their clients using their custom app in combination with their advisement services. Additionally, 40-60% of high wealth investors want the option to video chat with their financial advisor, which are now offered by JP Morgan and Morgan Stanley to high net worth clients.
MOTIVATIONS
Some of the key motivations listed that motivate people to seek financial advisement services included being too busy to commit time to ongoing investments and financial planning, the approach of retirement and lack of knowledge how to prepare for related complex financial issues. Additionally, some people also chose wealth management when a financial event made them question their own ability to manage their money.
Some of the reasons people chose mobile or 'robo advisors' over personal financial services included having limited money to invest and thus not wanting to pay the high fees often associated with traditional wealth management services as well as familiarity with other online financial services such as banking and e-commerce, and the desire to have advisement services and data that was available 24/7.
So to wrap it up, older and higher income earners tend to use personal advisors, whereas younger affluent millennials tend to turn to either mobile or a combination of mobile and in person wealth management services. In addition, there is an increasing demand for video conferencing and many wealth management services are now offering apps to combine with their personal services. Thanks for using Wonder! Please let us know if we can help with anything else!