Wealth managers fail to match clients' changing objectives
Wealthy clients often swap managers when undergoing a lifestyle change, suggesting advisers are not doing enough to adapt
Multi-millionaires across the globe are searching for a deeper relationship with their wealth management firm. Advisers need to be doing more to understand their clients’ personal financial objectives, as well as working hard to deliver a strong brand reputation.
Scorpio’s latest Futurewealth insight suggests high net worth (HNW) clients search exhaustively for a wealth manager. But, before they decide, they explore relationships with four or five different firms.
The Futurewealth Report 2014: The quest for a valued relationship also reveals HNW individuals use multiple introduction channels to find the right firm. On average, 24 per cent were referred by a friend or family member while 17 per cent found their provider through independent research.
The research draws upon the views of 3,025 of the global HNW population with an average worth of $2.9m (€2.12m).
New connections
The findings reveal HNW clients become edgy when their personal circumstances change. When asked about specific circumstances leading to their relationship with their existing wealth provider, 16 per cent cited failure of a former financial relationship as a reason for seeking a new connection. Worryingly, this rises to 24 per cent among the most wealthy client groups – those worth more than $4m.
The futurewealth report in statistics
3.7 - The average number of investment providers used by the Futurewealthy
11.3% - The percentage of clients worth more than $4m who were introduced to their main wealth manager through the firm’s website
50% - The proportion of their investable wealth managed by the main provider
28% - The percentage of Futurewealthy who feel their wealth manager delivers a good performance in social media
Source: Scorpio Partnership
Relationship breakdown is typically coupled with a blend of other lifestyle changes; 33 per cent of those worth more than $4m sought out their wealth manager when they purchased a home, while 30 per cent made the change when getting married. The responses illustrate that former providers have either failed to understand or have been incapable of adapting effectively to client’s changing objectives.
The desire to diversify assets was also a major driver for seeking out their main wealth management relationship. The findings confirm that the world’s wealthy each have three or four wealth management relationships.
This rises to 4.8 in Asia Pacific and falls to 2.1 in the Americas. Europe’s wealthy typically have 3.2 providers who guide them on personal investments.
In spite of this multiplicity, the main wealth provider wields immense power. In the Americas, the main wealth manager controls 60.4 per cent of the total investable wealth of each individual. In Europe and Asia Pacific, this share of wallet falls to 46.1 per cent and 45.5 per cent respectively.
With that sort of wallet share available to the firm which can empathetically address clients’ changing circumstances, advisers need to be alert to the challenges life events present to the HNW community.
Annie Catchpole is a research associate at wealth management think-tank Scorpio Partnership
