posted on:  6/9/2006     revised: 1/17/2010

What is the difference between a small investor and a large investor in terms of the service they request from advisers?  Perhaps not as much as we might expect.  A recent study by "Adviser Impact" magazine sought opinions from investors grouped into two categories: those with less than $500,000 and those with more than $500,000¹. The responses to a wide variety of questions and topics about their investments and advisers were very similar.  Apparently the size of the account does not really affect the attitudes or behavior of the investors.

Only a few interesting differences were noted among the investors:

1.  Large investors are more likely to have one adviser handle a majority of their investments.  Perhaps this is simply because they are likely to be courted by successful advisers. Smaller investors may seldom have the opportunity to meet a well qualified financial adviser.

2.  Large investors are twice as likely to want to meet with their adviser four or more times each year. This is perhaps common sense, since the inherent cost of this level of personal attention would generally erode the net results of accounts under $500,000 and therefore would deter smaller investors.

3.  Small investors are twice as likely to want planning advice to protect assets from the cost of catastrophic medical claims. Presumably the larger investors handle their insurance functions separately outside of the investment advisers' service. This might also be explained in terms of cost benefit and insurance. The cost of long term care insurance. for example, is not so significant to a person with higher net worth, and these same investors are aware that they could handle the out-of-pocket medical cost of most catastrophic medical problems.

The three differences listed might also be a function of age. Older investors are, as a group, wealthier investors. A significant portion of high net worth individuals are over age 65. They may tend to want to simplify their finances and want solid long term adviser relationships. They often have more time to devote to managing their finances than younger pre-retirement investors and may be less affected by health care expenses that are largely covered by insurance.

¹ The most common criteria for measurement used in studies of this type is net worth minus equity in personal residence(s). The term "high net worth" generally means the 1% of the population above this arbitrary mark.  The term "ultra high net worth" commonly refers to investors with more than %5 million net of home equity.

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Copyright 2010 by Tony Novak. Originally produced and published for the "AskTony" column syndication prior to 2007. Edited and independently republished by the author in March 2010. All rights reserved.