Investors these days are crossing over into alternate ways of managing their investments — with a sizeable segment neither relying on an advisor to handle their investments, nor doing it themselves, but combining the two.
A study from Hearts & Wallets found that more than 7 million affluent consumers who use both self- and full-service financial services providers are redefining traditional delegator and do-it-yourself investment preference categories.
According to the study, there's a major disconnect between what consumers say they do for investment advice and their actual behaviors. Study data indicate that only a shade more than half (53 percent) of investors who identify themselves as delegators, for example, and say they rely primarily on financial professionals to make investment decisions, worked with a full-service investment provider in 2014.
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Four mutually exclusive affluent U.S. household segments were examined by provider type in the study, "Neither Delegator nor DIY: Modernizing Segmentation to Optimize Service Models." Affluent households with investable assets of $100,000 to under $5 million were split into self only (not full), affluent households who work with at least one self-service provider (broker, etc.) and do not work with a full-service provider (broker, independent planner, RIA, etc.); self and full, affluent households who work with at least one self-service provider and one full-service provider; full only (not self), affluent households who work with at least one full-service provider and do not work with a self-service provider and neither (not full or self), affluent households who do not work with either a self- or a full-service provider, but work instead with one or more of the following: bank, insurance company or asset manager.
The study found that one-third of the 33.4 million households with $100,000 to $5 million use four or more firms to make decisions on $35.4 trillion in assets. Self and full consumers make decisions on about $7 trillion in assets and represent a quarter (25 percent) of households in the study; that's up from 19 percent in 2012. That group makes up about 19 percent of the traditional delegator category and about 17 percent of the traditional DIY category. It also accounts for about 30 percent of the general contractor category, in which consumers look for input from various sources as well as making some decisions themselves.
Affluent households who work with both self- and full-service firms have more money to invest, the study found, at an average of $942,000. That's 20 percent more than self (not full) households and 31 percent more than full (not self) households.
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