The US is the largest wealth market in the world and wealth management is the most attractive sector for HNW investors as it tends to have greater growth prospects, lesser capital requirement and higher returns on equity.
Figure: Ripple Effect: Education and Planning tools among HNWI in the US
Primarily growth oriented banks are recruiting on a small scale and even while recruiting, they are being very selective. Opportunities are increasing for experienced talent and they are also increasing incentives like bonus, deferred compensation to increase the long-term retention. The wealth management is undergoing a dramatic change as there is a shift in the client behavior and source of profitability. Generally HNW investors have a preference for simple, less risky and transparent products. The best way advisors could increase their assets and build upon their wealth is by giving priority to both high net worth as well as ultra high net worth investors.
Figure: Allocation of Investment among HNW Investors
There has been a strong recovery in equity market which has allowed high net worth investors to deploy more of their investment in private and public equity. Fixed income also improved from 10% to 11% whereas allocation to hedge funds only grew by 1%. Most high net worth investors value real estate more because allocation to this sector enhances profits and helps in rebalancing capital.
Figure: Preference for Financial Advisors
The need for financial advisors is arising out of fear of risk as investing involves inherent risks. So as shown above investors are segmented on the basis of risk tolerance like ultra high net investors are more dependent (88%) on advisors for investment as they fear risk, than stands high net investors who are comparatively less dependent (81%) on financial advisors. On the other hand mass affluent are less risk averse depending only (69%) on financial advisors. These financial advisors assist the investors on the importance of having a diversified portfolio (Figure1).
High net worth clients expects their advisors to be more socializing and proactive in their communication. Although HNW investors are knowledgeable but still they are keen on enhancing it to become unique and sophisticated investor in the market and more of socialization has reduced the need for HNW investors to place emphasis on social media.
Figure: Asset Allocation Portfolio
Female HNWI in the US pose serious challenge for wealth managers and their outlook for asset allocation is also different from that of males. In the US female HNWI have a tendency to rely more on cash as compared to males whereas they are less likely to possess equities. Females also have a firm belief that professional guidance plays a significant role in social change.
The US is home to a diverse and sizable HNW segment and a handful of client investment portfolios are appropriated into bond investments and more pressure is placed on better returns from alternative investments. Most of the US HNW individuals have gained wealth either by means of family business owner or as a first-generation entrepreneur which has led to increased demand for personalized wealth management services. The basic reason why the US HNW clients opt to have their wealth professionally managed is to gain access to sophisticated investment products while some clients feel that their portfolio is too complicate to handle themselves.
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Ankur Gupta, Head Marketing & Communications