What do wealthy families want from their wealth managers? Why does social investing make financial sense? What investment trends are we expecting post-pandemic?
A Trend towards Conscientious Investment
Wealth has been growing, exponentially for decades. In 2019 there was an increase of 11% in the number of HNWIs globally, the majority of which were in the US and Canada. In Europe the HNWI population grew by circa 9%, with Asia following closely at approximately 8%.
Whilst these are impressive rates of growth, since the start of 2020 the world has been faced with an unprecedented crisis, one we are still battling – Covid19.
In the first two months since the outset of this pandemic, there were losses of almost US$ 20 trillion wiped off global markets.
Notably there has also been a change in the focus of investments towards socially conscious initiatives. In fact, in recent months over 40% of UHNWIs have been expressing their interest in investing into sustainable enterprises and according to Capgemini it is estimated that 46% will do so by the end of 2021.
This trend though is not motivated by purely altruistic reasons, rather by the fact that sustainable investing offers less speculative risks and considerably higher returns.
Wealth managers have caught on and now 4/5 offer sustainable/impact investing options and solutions to discerning HNWIS.
So, who exactly is a wealth manager and what is the importance of hiring one?
A wealth manager is a trusted professional one can work with to help manage the complexities of one’s own finances. At times – referred to as wealth or financial advisors they tend to operate as a financial planner but their role has developed to encompass a much broader spectrum.
Wealth managers can support rich families, successful millennial entrepreneurs and business owners by giving them the peace of mind that their wealth is safeguarded. They offer valuable insight on lucrative investments and provide quintessential decision making surrounding their clients’ wealth.
Why is a Wealth Manager of value for HNWIs
The knowledge wealth managers possess in investment, their insight and access to an array of opportunities globally enables them to carve out a viable investment plan for their clients. They offer advice on investment options, digest insurance plans and scrutinize each opportunity looking out for risks and threats.
Wealth managers keep their clients informed on the latest regulatory developments that may affect their financial decisions and assets, protecting their wealth as a result.
The advice they provide enables HNWIs to grow their wealth and maintain a healthy investment portfolio. It allows them to enjoy a steady growth in their wealth that is also future-proof against market fluctuations and socioeconomic turmoil. Time-starved entrepreneurs and business owners especially, benefit greatly from wealth management firms’ expertise and time-savings by efficiently and professionally overseeing their assets.
Capgemini’s latest statements suggest that these volatile times have also prompted HNWIs to reconsider their existing arrangements with wealth management firms. Almost 50% are keen to change their current wealth managers.
When assessing whether a wealth manager is the right fit a few key questions to consider are;
Are their frameworks and check in place to ensure that they are working in your/your family’s best interest?
Does their wealth management philosophy align with your own?
Are they able to offer flexible and customized solutions for your particular circ*mstances?
Are they using the latest technology and/or AI to achieve results?
A Growing Demand for Wealth Management 2.0
After the dust settles from this current crisis, the demand for wealth management will soar. But not traditional, box-thinking, high management fee, plain-vanilla investment strategy and bureaucratic wealth management.
No, today’s affluent, wealthy millennials and young heirs to global empires are seeking performance-based fees, customized solutions, technologically advanced AI solutions that provide flexible wealth management. More boutique – less corporation and ideally a wealth management firm that has grown a conscious – or even better – an inkling for green or societal initiatives.
If would like to promote your expertise in wealth management or tax planning for HNWIs – we would love to hear from you. See below on how you can reach a truly global audience through CIVITAS POST.
Ultimately, the key point is that what most HNW clients actually want is an advisor who understands and can solve their unique problems… and that the value of such advice may go unrecognized unless an advisor is able to explain how their solutions align with the client's core values and goals.
One of the top three reasons high-net-worth clients switch? They want access to different products and services. Many of the respondents said they were looking for “wealth management adjacent services” like tax planning, trust and estate planning, and healthcare planning.
A significant challenge is meeting the evolving expectations of clients. As global wealth continues to surge, high-net-worth individuals (HNWIs) are seeking personalized, digitized offerings from wealth management companies.
Be patient, and understand that these relationships typically take much longer to build than others. There are only two consistently proven UHNW engagement methods — an introduction via a trusted acquaintance and/or pin-point targeting of an individual's unique interests, passions and hobbies.
Networking within the high-net-worth community is invaluable for attracting affluent clients. Attend industry conferences, charity galas, and exclusive social events where you will likely meet potential clients. Actively participate in professional organizations, clubs, or societies frequented by this demographic.
Investment information that's clear, credible, and based on impressive track records based on personal experience is something all clients will be seeking out. After all, advisors need to be able to advise, and to do so means relying on accomplishments earned in the past.
Look for professional credentials, such as Chartered Financial Analyst® (for investment managers), Certified Financial Planner® or related planning credentials, trust and estate attorneys, Certified Public Accountants, and Certified Trust Financial Advisors.
A good average number of clients per financial advisor to have is usually in the range of 50 to 150. But you may need fewer than that if you're primarily targeting high-net-worth individuals. Finding your ideal number of clients can depend largely on your goals as an advisor.
According to the personal finance site SmartAsset, the definition of wealth can vary widely. For example, individuals with $1 million in liquid assets are generally classified as having a high net worth.
Determining what your net worth should be at any age can be a bit tricky, and it depends on your income. Say you're 30 years old and your income is $50,000 per year. Your net worth should be $150,000, according to this formula. A $25,000 salary at age 30 would mean an ideal net worth of $75,000.
Finding wealthy clients can be done by word of mouth through your current client base, as well as participating in charity events, volunteering, and attending sporting events.
The future of wealth management is shaping up to be a fascinating landscape, with personalized services, technological advancements, and a focus on sustainability at its core.
Looking ahead, the Assets under Management are expected to exhibit an annual growth rate (CAGR 2024-2028) of 5.34%, leading to a market volume of US$158.70tn by 2028. This indicates a positive outlook for the Wealth Management market.
Wealth management has a high attrition rate of new advisors. According to the report, about 72 percent of rookie advisors — defined as having three or fewer years in an advisory role — failed or left the industry. Part of the reason could be that rookies don't have a clear path forward in their company.
Shifting your focus to high-net-worth individuals (HNWI) requires a deep understanding of their needs and expectations. The topics they are often interested in include: Financial Advice & Planning. Tax Planning.
These individuals often seek the assistance of financial professionals to manage their money, and their high net worth qualifies them for additional benefits and investing opportunities that are closed to most.
UHNWIs often have complex and demanding lifestyles that require efficient time management, resources and responsibilities. They may seek solutions that streamline various aspects of their lives, such as financial management, household management and personal scheduling.
HNIs need to invest and must have a long-term vision. Most HNIs are owners of big companies who are in positions of CEO, chairpersons, CTO, etc. Such wealthy individuals must be cautious and incorporate proper financial planning to keep up with their expensive lifestyle and ensure to preserve their capital.
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