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Good investing requires real sacrifices, according to Oaktree’s Howard Marks, but you can’t expect to be compensated just for making them.
More modes of advice being sought by HNWs as validators come to the fore: Praemium
While financial advice is an increasingly sought after service among high net worth (HNW) investors, the rise of ‘validator’ clients who want to work collaboratively with their adviser and may prefer episodic advice is growing according to investment platform provider Praemium.
In its High Net Worth Investor 2022 Report, whereby Praemium and researcher Investment Trends study the intergenerational wealth transfer and the changing habits of HNW investors, the platform provider explains that while there is an “increasingly positive” attitude towards financial advice, that attitude is taking a new shape.
“The proportion of HNWs classified as ‘self-directed’ has continued to decline and the pool of ‘validators’ to grow,” the report states, explaining that a “validator” is a HNW investor that is more likely to be open to working collaboratively with a financial adviser to get a second opinion or validate their investment ideas. On the other ends of the spectrum are self-directed investors that wish to do everything themselves, or delegators, who prefer a holistic advice relationship.
“With 60 per cent of HNWs identifying as a validator, these individuals would prefer to only seek advice to access certain investments, for technical advice or for a second opinion on their own investment decisions.”
The self-directed cohort has made up around 50 per cent of the HNW sector traditionally, with validators making up around 40 per cent and delegators (plus ‘others’) 10 per cent.
In October last year, however, Investment Trends reported that the validator cohort had increased to 56 per cent, while self-directed HNW investors had decreased to 34 per cent.
Advisers are still (even increasingly) the “first choice” for investment advice, Praemium states, particularly among the emerging affluent.
The results do, however, point to an increasing predilection for HNW investors to veer away from traditional, holistic advice services and towards episodic advice when they feel like they need expertise on a certain matter.
According to Investment Trends, the development has a lot to do with a change in consumer sentiment after the pandemic.
“Post pandemic, investors are vastly more likely to indicate they would be open to working collaboratively with a financial adviser to seek a second opinion or validate their investment ideas,” Investment Trends’ report stated. “The ‘rise of the validator’ has certainly arrived.”
Praemium notes that this change offers an opportunity to financial advisers.
“The research outlines that HNWs see themselves as capable investors seeking advice predominantly to validate their own investment choices,” Praemium states. “Advisers can take advantage of this lucrative market through offering more specialist or technical support that helps them to meet their financial goals more effectively, and by adjusting their [customer value proposition] to talk to this segment of the investor market more successfully.”
