Many high-net-worth investors are not fully prepared to deal financially with their death, according to a study released Monday by PNC Advisors, which has concluded that financial companies must be more aggressive in advising these customers.
A nationwide survey of 792 affluent people, including nearly 500 with more than $1 million of investable assets, found that most had not prepared an estate plan and many have not written a will or started a trust fund. The study said 40% of respondents lack a will and two-thirds do not have a professionally prepared estate plan.
Joan Gulley, the chief executive officer of PNC Advisors, the wealth management unit of PNC Financial Services Group Inc. in Pittsburgh, said the study found that 37% of people with more than $10 million of investable assets had taken no action to prepare for the future. The study illustrates that wealth advisers need to reevaluate their business models to determine whether they are really serving their customers or just pushing products, Ms. Gulley said.
"This is not about introducing another new product to pull in new clients," she said; "this is about really working with customers. This is about bringing expertise and knowledge to the financial planning process. As advisers, we have to determine their goals and then determine the pieces to put in place to achieve those goals."
The study said that 19% of respondents with $10 million of investable assets and 21% of those with $1 million to $4.9 million invested were worried that they would not have enough money to support the lifestyle they want in retirement.
"This really underscores that wealth advisers today need to be more than just wealth advisers that provide asset allocation strategies and products," Ms. Gulley said. "People need advice. We have to think about this business as an advisory business. We have to rethink the relationship management business so we are discussing planning, goals, and aspirations and determine then if they have the tools to meet those goals."
She said the fact that many wealthy people did not even have wills or estate plans startled her, though their feeling of unpreparedness for retirement did not surprise her.
PNC Advisors' people had seen this lack of preparedness anecdotally even before the company did the study, Ms. Gulley said. So in the past three years the banking company's unit has built a network of investment advisers for nine markets in five states. And the parent company itself expanded its investment management capability by distributing products and services through its brokerage arm (PNC Investments), wealth management unit (PNC Advisors), and independent money manager (BlackRock Inc.).
She said PNC Advisors, which managed $50 billion of assets at Dec. 31, decided it had to be more than an investment adviser. Her unit invested in planning capabilities and expanded the number of advisers available in each of its markets, she said, adding 30 financial planners who can offer retirement services and estate planning.
PNC Advisors has financial planners in all of its markets, she said, so it can offer a full range of wealth planning capabilities. Its nine markets are: Boston; Cincinnati; Greenwich, Conn.; Louisville, Ky.; Naples, Fla.; Vero Beach, Fla.; Philadelphia-southern New Jersey; New York City-northern New Jersey; and Wilmington, Del.
The wealth management business is evolving, Ms. Gulley said, and banks and asset managers must evolve with it.
"This survey is a call to action for a lot of folks in the industry," she said. "The client's expectations of us have changed and have to change. We can't just offer investment advice. Clients expect a lot more from a wealth adviser."
Ms. Gulley said PNC Advisors would continue to hire wealth planners strategically.
"We want knowledgeable, experienced, and capable relationship managers that are accountable to clients," she said. "We want to understand our clients' needs and bring in the right skills and people to provide a comprehensive plan."
"Wealth planners are the linchpin, and we can offer capabilities around that," she said. "This is still at the end of the day a one-to-one relationship business."
Analysts said the study's results are surprising but demonstrate an opportunity for banks, asset managers, and other financial companies. "I think some firms believe that the pool of affluent investors is dry and that they have all been nabbed by the biggest firms," said Burton Greenwald, a Philadelphia analyst. "The truth is, these large firms are not preparing the wealthy for retirement. These wealthy individuals are going to be picked off by other firms."
Ms. Gulley agreed that an opportunity exists for companies that have the right tools and the right people to supply the type of guidance wealthy people need.
"We have positioned our business for wealthy individuals," she said. "This survey really validates our approach with clients and prospects. It is critical to have a wealth planner."
