Asia’s rich have the highest number of private banking relationships, meaning their main provider oversees a relatively lower share of the individual's wealth, finds new research. This is the exact opposite of findings for the Americas.
A study* of more than 3,000 high-net-worth individuals globally – of whom nearly half were based in Asia Pacific – shows that the world’s wealthy have an average of three or four personal investment relationships per individual.
The number stands at 4.8 in Asia Pacific, but falls to 2.1 in the Americas and 3.2 in Europe.
But in the Americas their main wealth manager controls 60.1% of each individual’s investable wealth. For Europe this share of wallet falls to 46.1% and to 45.5% for Asia Pacific.
Sebastian Dovey, managing partner of wealth management research firm Scorpio Partnership, points to the power that the main wealth provider wields in spite of such multiplicity. “This means there is a huge opportunity for firms who can present the right value proposition to clients in the pre-purchase phase,” he says.
Asked if there were specific circumstances that led them to search for a main wealth manager, 16% of respondents with average assets of $2.9 million cited the failure of a former financial adviser as a driving factor. This rises to 19% in Asia Pacific and 25% among those with more than $4 million.
"This is startling because it means that one in five clients arrive at their new advisory relationship with a bitter taste in their mouth," Dovey notes. "This has implications for their expectations and what they are willing to tolerate at a firm."
The study ties a breakdown in manager relationship to lifestyle changes, such as a new job or moving home, indicating that the wealthy become more edgy in their financial relationships during key life intervals.
Notably, a fifth of respondents sought out a main wealth provider when buying a home, while an equal proportion found their current main relationship during a career change or promotion.
In Asia Pacific these statistics were higher, with the percentage of respondents seeking a wealth manager when moving home or job at 31% and 26%, respectively.
Marc Stevens, chief executive of NPG Wealth Management, notes this suggests a need for wealth providers to fully understand the goals of their clients before they come 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,” he says.
The high-net-worth population uses a variety of introductions to connect with a firm. On average 24% were introduced to their wealth manager by family or friends, 17% through independent research of the market and 12% through a relationship manager.
When searching for a wealth firm, respondents with more than $4 million say they seek an adviser who can demonstrate expertise in diverse areas. There is a notable 20 point differential in the significance they attribute to a firm’s reputation (59%) and its social media activity (39%).
By contrast, less wealthy peers focus on specific attributes when choosing a wealth provider. Those with less than $500,000 emphasise a firm’s reputation in the selection process, giving it an importance rating of 83%.
They also stress the cost of products and services, which scored 70%. However, they rated social media activity at just 16%.
"Wealthier clients actively choose wealth providers who can demonstrate their social media expertise," explains Dovey. "They will look at a range of factors, including digital delivery, when deciding which provider to work with.
"By comparison, their less wealthy peers are more likely to select a manager based on distinct factors such as reputation and associated costs."
* The study, The Futurewealth Report: the quest for a valued relationship, was released yesterday by SEI, NPG Wealth Management and Scorpio Partnership. It is the first of four papers.
In all, they surveyed 3,025 wealthy individuals with average assets of $2.9 million. Geographically 47% of the sample group lives in Asia Pacific, 34% in the Americas, 14% in Europe and 5% in other countries around the world.
NPG Wealth Management provides European cross-border life assurance, while SEI offers investment and fund processing and investment management business outsourcing.