Sunday, March 27, 2011

Multimillionaires* Have Multiple Advisers

Households with investable assets of $10 milion or more typically work with five or more advisers, according to a Cerulli Associates study previewed by Investment News. Only 18% work with just one adviser. That's not surprising. After living through 2008-2009, only the bravest of multimillionaires would keep all their eggs in one financial organization's basket.

Even investors not rich enough to pay for advice often divide their holdings into two or three piles. Your humble blogger's T-bonds, for instance, reside in a retirement account at a Connecticut bank. Equities and munis sit in an online brokerage account. A mutual fund company holds a small emergency fund for us.

Here's how one multimillionaire arranges things, courtesy of The New York Times:

Reginald K. Brack Jr., former CEO of Time and a member of Tiger 21, took on his first adviser ( a broker?) when he needed to diversify out of Time Inc. stock. For munis he turned to Royal Bank of Canada. His third source of advice, on investing and estate matters, works for Fieldpoint Private Bank and Trust. Mr. Brack is one of the bank's founders.

One surprising finding from the Cerulli survey: "44% of wealthy households had changed their primary financial adviser over the past 12 months." If so, picking up new business from investors with $10 million or more should be easy. Hanging onto their business? That's the challenge.

*Original post erroneously read "Hectomillionaires." See footnote here.

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