CAMBRIDGE, Mass.--(BUSINESS WIRE)--Self-directed investors are often synonymous with youth, wealth, confidence and active trading. However, a new report shows many self-directed investors don’t live up to the hype and have varying degrees of net wealth, investment savvy and trading experience. 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, ranging from “Dependent” investors, who utilize an advisor for 75% or more of their assets, to “Soloist” investors, who manage 100% of their investable assets with no assistance from an investment professional.
For starters, the ubiquitous notion that all self-directed investors have bounding 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—Assisted and Influenced investors—who 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—whether it’s appealing to individual investors or deepening relations with advisors who serve them.”
| Anticipated Investment Activity: Next Month | |||||||||||||||
| Self-Directed Investor Type |
Neither |
Both |
Add | Withdraw |
Net expected |
||||||||||
| Dependent 1%–25% (A) | 31% B | 10% | 46% | 13% | +32 | ||||||||||
| Assisted 26%–50% (B) | 22% | 9% | 56% AD | 12% | +44 | ||||||||||
| Influenced 51%–99% (C) | 23% | 11% | 56% AD | 10% | +47 | ||||||||||
| Soloist 100% (D) | 34% BC | 10% | 45% | 11% | +34 | ||||||||||
| Q20A. Over the next month, will you…? | |||||||||||||||
| Base: Affluent Investors | |||||||||||||||
About The Self-Directed Investor Study
Cogent Reports conducted an online survey of a representative cross section of 1,697 affluent investors with $100,000 or more in institutional investable assets from February to March 2014. To ensure the population for this research was representative of the universe of affluent investors, strict quotas were established as determined by Cogent Reports Investor Brandscape® 2013 study. Minimal weighting was applied to adjust for purposeful deviations from the actual marketplace distribution. Market Strategies will supply the exact wording of any survey questions upon request.
About Market Strategies International
Market Strategies International is a market research consultancy with deep expertise in consumer/retail, energy, financial services, healthcare, technology and telecommunications. Offering custom research services and syndicated research products, the firm provides insights from more than 75 countries, focused in the areas of brand, communications, CX, product development and segmentation. Its syndicated products, known as Cogent Reports, help clients understand the market environment, explore industry trends and evaluate and monitor their brand and products within the competitive landscape. Founded in 1989, Market Strategies is one of the largest market research firms in the world, with offices in the US, Canada and China.
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