Despite growing HNWI wealth and trust towards wealth managers, wealth managers are falling short in their ability to attract a greater share of HWNI assets.
A survey conducted by Capgemini in 23 countries covering 5,200 HNWIs shows that wealth managers handle 22% of global HNWI assets. More than one third of total HNWI assets is in liquid assets. About 18% is sitting in retail bank accounts while another large chunk (15%) exists in the form of liquid cash. This provides a good opportunity for managers to tap these assets. A portion of the remaining HNWI wealth is locked up in various illiquid assets, including real estate and businesses.
The good news is that the wealthy are open to the idea of consolidating their assets with wealth managers. The survey found that HNWIs are willing to consolidate more of their assets with wealth managers. To achieve this, the report says that wealth managers to need to service them well and keep their satisfaction levels high. The survey found that 68% of satisfied HNWIs are more likely to move assets to their wealth managers. The decision to move their assets largely depends on investment returns. 27% HNWIs said that investment returns was the most important factor in their decision to move assets to wealth managers.
The survey covered HNWIs aged over 60 and under 40. The survey found that young HNWIs (under 40) have very low levels of assets with wealth managers and they are open to the idea of consolidating their assets under a manager. Nearly 63% said they are willing to do so. “Younger HNWIs view consolidation as a valid way to achieve their goal of simplifying their wealth management relationships. Wealth managers should strive to take advantage of this tendency by providing solutions that appeal to more youthful clients,” suggests the report.
So what is it that the wealthy look for in a wealth manager? The survey found that financial planning expertise (40%) is among the most important elements HNWIs seek from wealth mangers, along with deep investment access (39%) and investment advice (47%). To deliver this advice, wealth mangers need to give a human touch for delivering these diverse needs. “Financial planning requires greater deft and nuance than the typical automated advisor can currently provide, particularly when it comes to bigger and more complex portfolios,” suggest the report.
Automated advice is bringing a slow disruption in financial products distribution industry. However, the report says that innovative digital technologies and wealth managers will be most effective when they co-exist and collaborate.
When it comes to paying fee for advisory services, the survey found that 30% HNWIs pay a percentage of assets based fee. However, they are more enamored with the idea of paying according to investment performance. 28% of HNWIs feel pay for performance is ideal.
When quizzed about their preference of investment style, interestingly, only 19% HNWIs are likely to embrace the approach of famed value investor Warren Buffett. They are more likely to prefer growth style, picking investments that have above-average potential to grow even at expensive PE.
The survey ‘World Wealth Report 2016’ covered Europe, Asia-Pacific, Middle East & Africa, Latin America and North America. The report shows that the global HNWI wealth expanded from US$16 trillion in 1996 to US$ 58.70 trillion in 2015. Asia-Pacific clocked the greatest growth during this time while Europe lost the most ground.
