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HNW Want it Their Way

Capgemini recently released its 25th World Wealth Report. Among its observations and conclusions, which included the fact that over the past five years North America has overtaken Asia Pacific in terms of population and total wealth, were several others of note.

The pandemic crash was unlike others
In a typical post-crash environment, HNW investors take a risk-off approach, generally shifting to fixed income, cash, and other less risky investments. This occurred after the tech bubble of the early 2000s and the financial crash of 2008/2009. Interestingly, this did not occur after the Q1 meltdown of the markets as the pandemic shut down the global economy. In fact, cash holdings decreased slightly, while alternatives and real estate rose. One potential reason may be, since there wasn’t an underlying financial crisis or weakness, the expectation that the real economy would reopen and recover relatively quickly once COVID-19 was under control.

HNW investors want more involvement, especially when the markets are doing well
Investors want the most involvement in their portfolio during bull markets, reflecting an “anyone can do it, can’t lose” attitude. When markets are volatile or negative, however, investors are more likely to seek and value professional advice, looking for transparency, risk management, a rigorous process, and a goals-based approach. Wealth managers must be prepared to accommodate investors’ needs and attitudes in different environments, adapting a dynamic “hybrid” approach that allows clients to choose the model that works best for them at different points in time.

It’s not all about digital
There is no doubt that advances in technology and the ability to serve clients virtually have fundamentally changed the service model for all investors. However, at the same time, HNW clients increasingly demand a highly personalized experience, with “real” people as well as digital access, that is tailored to their specific situation, needs, and preferences. Organizations that can deliver high-quality omnichannel sales, service, reporting, and value-added communications will be the winners.

Competition is everyone
HNW firms face competition from both traditional players and non-traditional players from all over the world. This includes traditional asset managers, banks, trust companies, brokerages, RIAs, insurance companies, and online offerings. As the line becomes increasingly muddled between what firms really are due to acquisitions, partnerships, and alliances, it will be increasingly difficult for single offering, stand-alone entities to succeed.

The wealth management industry continues to grow and evolve rapidly, impacted by both micro and macro factors. Firms that succeed will be those that recognize and embrace the changing dynamics of wealth.