# The No. 1 difference between millionaire investors and everyone else

That’s according to a recent study on what’s going through the minds of investors with portfolios worth at least $1 million.

The researchers at Yale School of Management and the University of Toronto started with questions to almost 2,500 high-net worth investors.

Then professor James Choi at Yale and professor Adriana Robertson at the University of Toronto compared those replies with their previous research into the equity investing attitudes of a nationally representative survey with approximately 1,000 people at all income levels.

• In contrast to the importance that high-net-worth investors placed on input from financial advisers, a nationally representative sample of investors at all income levels put advice from a financial planner at No. 23 on the list of factors.

• Among the employed members of the nationally representative sample, 47.5% said “years until retirement” was a very or extremely important factor when deciding what portion of their portfolio was invested in equities. That made it the top most cited factor for employed people within the representative sample.

• The investing time horizon before retirement was the second-most cited factor of importance for wealthy, employed investors. Almost 26% of wealthy, working investors said their years until retirement were very or extremely important in the equity allocation decisions.

• Though risk of illness was the topmost cited factor for all investors in the everyday sample, it was the sixth-most cited factor for wealthy investors (20%).

• A lack of knowledge about how to invest is the seventh-most cited factor in the representative sample (36%) and it ranks 21st among the well-off, coming in at nearly 11%.

To be sure, affluent and everyday investors are fueled by a number of the same concerns, the research shows. That includes years until retirement, risk of illness and injury expenses and the need for cash on hand.

The risk of rare stock market disasters also weighed on the minds of both groups. It’s the fourth-most cited factor for the representative sample and fifth for the wealthy sample. (Researchers fielded both surveys years before the coronavirus pandemic’s economic fallout but years after the Great Recession.)

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Likewise, both groups put little weight in factors like investing tips from non-professionals or “rules of thumb,” like investing a percent in stocks that’s based on 100, minus one’s age.

But the research is still a stark reminder that people see the same stock market differently — especially at a time of great volatility and more retail investors trying their hand. It also underscores how health expenses loom large for many Americans and play into other financial decisions.

“There are areas of commonality,” Choi, one of the authors, told MarketWatch. But wealthier investors displayed “a deeper level of comfort with the market and confidence in their ability to navigate the market.” In the nationally representative sample, “you see a lot of discomfort with the market.”

Choi cautioned against reading too much into the wide percentage ranges between the wealthy survey sample and the nationally representative one. “It could just be the wealthy using a different scale internally,” he noted.

Around 55% of Americans own stock, according to Gallup data from earlier this year. That’s essentially unchanged in the past 10 years, but it’s below the 62% mark in the early- and mid-2000s, the data shows. Richer poll participants were more likely to own stock, the poll shows. Eighty-four percent of people making at least $100,000 said they owned stock.

The new study asked about stock ownership in broad terms, which could cover investments including a 401(k) account, a brokerage account, individual stock ownership and more, Choi noted.

In one interesting twist, wealthy investors on the whole said “high-momentum” stocks provided lower expected returns than “low-momentum stocks.” But researchers noted more people in the representative sample saw it the other way around.

Momentum relates to the rate of change in a price. Historically, high momentum stocks had high average returns, the study noted.

The advice gap

Around two-thirds of the wealthy survey participants had a professional adviser of some sort, according to the new research. But other data suggests many people go without professional advice.

Three quarters of people told a CNBC and Acorns Invest in You Savings Survey last year that they managed their own finances.

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One reason could be the cost of professional advice. Many advisers work on a percentage basis, charging 0.25% to 1% of a client’s account, according to the personal finance website NerdWallet. Other advisers can charge a flat fee that ranges from $2,500 to $7,000 a year.

“Financial advice is expensive,” Choi said. “For somebody with a small amount of assets, it can often not be very economical to get that advice professionally. Whereas with wealthy investors, there’s a lot of dollars to spread usefulness of that advice.”

Some financial advisors weren’t surprised by the divide between the two investing groups.

“The discrepancy is surely based on the perception that financial planning is meant for people who have wealth. We are a field that has had an image problem — we present ourselves as a solution for wealthy families and individuals, and that perception lingers,” said Karen Van Voorhis, director of financial planning at Daniel J. Galli & Associates in Norwell, Mass.

“Just saying ‘I work for a wealth management firm’ creates an impression that a firm is for only certain people,” she added. The field has become more accessible, according to Van Voorhis. “But ‘regular people’ still don’t think that professional financial advice is for them — we have more work to do on this.”

Meanwhile, Michael Simmons’ best clients in more than two decades of offering financial advice “are those who are willing to take advice. Generally speaking, anyone willing to pay for advice usually is also keen on following it,” said Simmons, a member and director of financial planning at Transitions Wealth Management in Denver, Colorado.

The rise of discount brokerage accounts, with their reduced fees and commissions, has been a boon for the investing public, he said.

“Unfortunately, it’s also created the illusion that paying for financial planning or advice is neither needed nor in an investor’s best interest as it can be seen from the lens of the average investor as an expense without value,” Simmons said.