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HNW RESEARCH: WORLD’S WEALTH MANAGERS NEED TO WATCH OUT FOR MOMENTS WHEN THEIR CLIENTS COME “UNSTUCK”

LONDON – According to a study released today by SEI (NASDAQ: SEIC), NPG Wealth Management and Scorpio Partnership, wealthy clients are becoming unstuck from their wealth managers during significant life events. The study, entitled The Futurewealth Report: The quest for a valued relationship, surveyed 3,025 of the global wealthy with average assets of USD2.9 million. This is the first of four papers that will be released during the year, each analysing a phase of the wealth management customer journey.

In this paper, we analyse the start of the customer journey to find out more about how wealthy individuals identify and engage a wealth manager. When asked if there were specific circumstances leading to their relationship with their main advisor, 16% of respondents cited the failure of a former financial provider as a reason for beginning a new relationship. This rises to 19% in Asia-Pacific and 25% among those worth over USD4 million.

Significantly, this wealth manager relationship breakdown is typically coupled with a broad blend of other lifestyle changes, indicating that the wealthy become edgy during key life intervals. In particular, a fifth of the Futurewealthy sought out a provider when buying a home, while an equal proportion found their current relationship during a career change or promotion. These statistics are even higher in Asia Pacific where the percentage of respondents seeking a wealth manager when moving home or job stood at 31% and 26% respectively.

“The findings show a necessity to fully understand the goals and objectives of every client before they become unstuck. This is about more than knowing product and service preferences, it is about understanding what matters to them and how personal circumstances are evolving” commented Marc Stevens, CEO NPG Wealth Management.

Figure 1: Percentage of respondents who referenced the following circumstances as a reason to move to their current main wealth provider

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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 have three or four wealth management relationships each. 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 their personal investments.

In spite of this multiplicity, the main wealth provider wields immense power. In the Americas, the main wealth manager controls 60.4% of the total investable wealth of each individual. In Europe and Asia Pacific, this share of wallet falls to 46.1% and 45.5% respectively.

“The main wealth manager has control over a very significant portion of their clients’ assets.” commented Sebastian Dovey, Managing Partner of Scorpio Partnership. “This means there is a huge opportunity for firms who can present the right value proposition to clients in the pre-purchase phase.”

Alfred P. West, Jr., Chairman and Chief Executive Officer of SEI added “We are committed to developing new ways to enhance the customer experience. To that end, we wanted to delve deeper into clients’ motivation and learn about what drives them as customers. Through these studies we have not only gained unique insight into the psyche of the Futurewealthy, but have analyzed the elements they value in their relationships with wealth advisors. We hope this research helps wealth management organizations identify areas where they need to improve and provides them with a roadmap to do so.”

Other selected findings

  • Asia’s wealthy explore relationships with a higher number of firms before settling on a provider. On average, they screen 4.6 wealth managers before deciding on their main relationship, while respondents from Europe and America assess 3.2 and 2.1 respectively.

  • he high net worth population use a variety of introductions to connect with a firm. On average, 24% were introduced to their main wealth manager by family or friends. A further 17% found their main provider through independent research of the market while 12% connected through a relationship manager.

  • When searching for a wealth firm, respondents with over USD4 million want a provider who can demonstrate their expertise in diverse areas. For these clients, there is just a 20% difference between the significance of a firm’s reputation, which received an importance score of 59%, and its social media activity, which was given a mark of 39%.

  • By contrast, their less wealthy peers focus on specific attributes when choosing a wealth provider. First and foremost, those worth less than USD500,000 emphasise a firm’s reputation in the provider selection process, giving it an importance mark of 83%, as well as the cost of products and services, which received a score of 70%. Meanwhile, among these clients, social media activity has an importance mark of just 16%. 

Notes

  1. In total, 3,025 individuals took part in this fifth global poll of the Futurewealthy. The average level of wealth among these individuals was USD2.9 million.

  2. Geographically, 47% of the sample group live in Asia Pacific, 34% live in the Americas, 14% live in Europe and 5% live in other countries around the world. 

  3. The research covered four different phases in the wealth management relationship, the first of which has been included in this paper: 

    • The search for a wealth management 

    • Important attributes when carrying out a transaction

    • Reasons for staying with a wealth manager

    • Referrals and recommendations in the wealth management relationship

  4. The research was conducted using an online survey. Participants were identified using profiling techniques to determine their likelihood of qualifying as Futurewealthy candidates. They were contacted directly by email.

  5. The research was conducted by Scorpio Partnership in collaboration with NPG Wealth Management, and SEI.

  6. Scorpio Partnership is a pioneer in the art of translating the complex needs of wealthy clients into practical, innovative and profitable solutions to target these customers. This award-winning firm has surveyed over 30,000 millionaires and billionaires worldwide to collect opinions on what they will need next. With this knowledge, the firm has implemented strategic research, practical consulting and business innovation projects in over 35 countries. Scorpio Partnership is part of McLagan, an AON Hewitt Company. 

  7. NPG Wealth Management is a leading provider of European cross-border life assurance solutions standing for excellence, transparency and compliance in the (Ultra) High Net Worth and High Affluent business.NPG Wealth Management’s operations are based in Luxembourg, Ireland, Gibraltar and Bermuda. From these 4 jurisdictions, the Group provides compliant wealth management solutions with active presence across 11 core Pan-European markets. Over the years, NPG Wealth Management has built a solid reputation of service excellence with its insurance intermediaries and clients with in excess of 5 billion euros of assets under management. For more information, visit www.npgwm.com

  8. SEI (NASDAQ:SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of December 31, 2013, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $559 billion in mutual fund and pooled or separately managed assets, including $232 billion in assets under management and $327 billion in client assets under administration. For more information, visit www.seic.com

In 2014, what was the average cost income ratio across the international wealth management and private banking industry?