Contrary to commonly held beliefs, many self-directed investors are not young, wealthy, active traders, but instead have varying degrees of net wealth, investment savvy and trading experience and could benefit from the support of an investment professional. These and other important findings are included in The Self-Directed Investor™ recently published by Cogent Reports™, the syndicated research division of Market Strategies International.
The report divides the affluent investor population into four tiers defined by the percentage of investable assets managed independently, including:
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¡°Dependent¡± investors, who utilize an advisor for 75% or more of their assets,
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¡°Assisted¡± investors, who utilize an advisor for 50% or more,
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¡°Influenced¡± investors, who utilize an advisor for 25% or more, and
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¡°Soloist¡± investors, who manage 100% of their investable assets with no assistance from an investment professional.
For example, the notion that all self-directed investors have boundless affluence is a misconception. The Soloist investor segment generally has considerably lower net worth, investable assets and income than segments of their peers who employ the services of a financial advisor. According to the study, Soloist investors report an average net worth of $876,000, compared with $1.1 million for Dependent investors.
¡°Upon comparing the self-directed tiers, it is clear the presence and support of an investment professional is critical to investor confidence and often promotes higher rates of product diversification and brand experimentation,¡± says Sonia Sharigian, senior product manager at Market Strategies and lead author of the report. ¡°In fact, the highest trading activity levels and perhaps opportunity is happening within the middle two tiers¡ªAssisted and Influenced investors¡ªwho foresee adding the most dollars in the next month.¡±
Nonetheless, the Soloist segment represents a sizable portion (31%) of the total affluent investor population who may require more education and outreach from financial service providers.
¡°These investors trade less frequently, own fewer types of investment accounts and are aware of fewer brands than their peers who work with financial advisors, so it becomes even more critical for providers to recognize these nuances,¡± says Linda York, vice president of the Syndicated division at Market Strategies. ¡°Understanding the unique needs within each segment will enable providers to refine their strategy¡ªwhether it¡¯s appealing to individual investors or deepening relations with advisors who serve them.¡±
Anticipated Investment Activity: Next Month
