The sharp deterioration of wealth in 2008 may have jeopardized the trust of some clients in their advisors, but most high net worth investors with advisors will continue to depend on this professional advice even more, a new study reveals.

According to the Northstar/Sullivan Rebuilding Investor Trust Survey, which polled more than 1,500 high net worth investors in the United States, close to two-thirds of respondents have a high level of trust in their primary financial advisor. Only a quarter of the households, which have at least US$100,000 in investable assets, excluding real estate and workplace retirement plans, say trust in their advisor has declined since before September 2008.

Nine in 10 investors who had an advisor when the market downturn started are still working with that same advisor, and 20% say they are relying on their advisor even more than before.

Despite trusting their advisors, however, affluent investors have lost trust in financial institutions, the financial markets, the media and the government, the survey found. Just 10% of respondents said they highly trust financial advisors or financial institutions in general.

The study found that high net worth investors who do not have an advisor have no plans to tap financial advisory expertise in the future.

High net worth investors have been severely impacted by the market declines, according to the study. It shows a staggering five-fold increase in the number of affluent investors who are not confident in their ability to meet financial goals: 25% today vs. just 5% a year ago.

There has also been a startling 75% decline in the percentage of households who are very confident about their ability to achieve their financial goals: 14% today vs. 54% prior to the market downturn.

Although most investors continue to trust their advisors, the vast majority of respondents favor greater oversight of financial institutions, as well as additional oversight of financial advisors. Nearly 80% of survey respondents said they blame the financial crisis on “big Wall Street firms,” and three-quarters claim that “Wall Street hasn’t learned its lesson.”

And despite the market rally this year, tolerance for risk has markedly decreased in all age groups. This trend is most notable in the 25-45 age group – the segment with the most time to recover. Overall, 54% classify themselves as conservative investors, compared to just 22% a year earlier.

“Going forward, in this environment, the cost of new customer acquisition is likely to be higher,” said Jim Neuwirth, managing director of Northstar Research Partners, which conducts research on the financial services industry. “What this study clearly shows is that the best opportunities for financial services companies are in cultivating their existing client base.”

IE