The number of prosperous households is on the rise, and they’re clamoring for real wealth managers. Despite the economic downturn of 2001-2003, there were more U.S. households with a net worth of $1 million or more in 2004 than ever before. That’s according to a new study by the Spectrem Group. But wealth professionals counting on a return to pre-9/11client relationships are in for a disappointment. Even as they grow more numerous, an increasing number of wealthy investors want to work in partnership with their advisors.

The number of U.S. households worth $1 million or more, primary residence aside, increased 21% last year to an all-time high of 7.5 million, according to Spectrem’s newly released "Affluent Market Insights 2005" report. This total, an all-time high for millionaires, represents a net gain of 1.3 million households. And the rate of growth was stronger at higher wealth levels. Households with at least $5 million in net worth, also excluding primary residences, increased 38% in 2004 to a record 740,000, a net increase of 200,000. Lower down the scale, households worth between $500,000 and $1 million, increased 25% to 13.1 million, the highest number since 2000.

Still not there

“It is clear that 2004 was a very good year for millionaires, who finally broke the record of 7.1 million set in 1999,” says Spectrem’s managing director Catherine McBreen.

But Spectrem’s research also indicates that affluent investors are becoming less dependent on their advisors, says George Walper, president of the Chicago-based research and consulting firm. “We’ve seen a significant decrease in the number of households that view themselves as wholly advisor-dependent.” In fact the number of affluent households who look to their advisors to make all or most of their investment decisions has gone from 25% in 2001 to just 10% last year. No less than 30% now view themselves as completely self-directed.

“What we’re seeing in all our research is that, since 9/11, people are becoming far more hands-on in their approach to investing,” says Walper. Aside from affluent households on the two extremes of advisor dependency, 32% consider themselves “event-driven,” meaning they use an advisor at major turning points in their lives, such as divorce or retirement, and 28% are “advisor-assisted,” meaning they look to an advisor for investment counsel but make their own decisions.

Taken together those findings point to a need – down the prosperity scale as much as in the solidly well-to-do bracket – for true wealth management. “If [advisors] are willing and able to work with their clients and provide the right solutions – holistic solutions – in an open architecture environment, then they’ll be able to work with the 70% [of investors] who use advisors,” says Walper. “The business model that focuses on clients who are 100% dependent really has to change.”

The trouble, adds Walper, is that some firms that have adopted the “wealth management” label don’t in fact provide advice that’s objective and takes into account the client’s overall needs and goals. “Everybody is beginning to use the right words,” he says. “But in terms of action a lot of the industry just isn’t there yet.” –FWR