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Please find below the press release issued today.
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World Wealth Report 2020:
High net worth individuals show interest in sustainable investing, scrutinize fees and want hyper-personalization
In
That was then, this is now
As per
“In the face of today’s extraordinary uncertainty, wealth managers and firms are finding themselves in uncharted waters,” said
Sustainable investing and value-added services gain traction
Growing interest in sustainable investing (SI) is offering firms a high-potential engagement opportunity. Among the ultra-HNWI segment4, SI is building considerable momentum. While 27% of HNWIs overall expressed interest in SI products, 40% of ultra-HNWIs were willing to put cash into sustainability.
HNWIs plan to allocate 41% of their portfolio to SI products by the end of 2020, and 46% by the end of 2021. Wealth management firms have recognized the trend and are prepared to meet the demand as 80% now offer SI options. Funds focused on socially responsible investing have been a rare bright spot in 2020 market activity, and while HNWI investment in SI recognizes social/environmental impact, they are also motivated by financial value. The top reasons driving HNWI interest in sustainable investing are higher returns and lower risks – 39% expect to receive higher returns from SI products, while 33% view SI as sound and less speculative. Interestingly, already 26% of HNWIs cite a desire to give back directly to society.
Hyper-personalization is needed to meet evolving expectations
Unpredictability in 2020 is set to drive asset adjustments as well as higher client expectations and scrutiny around advisory fees. Equities became the most significant asset class in early 2020 and accounted for 30% of global HNWIs’ financial portfolios, largely due to robust equity markets and financial stimulus restoring trust. HNWIs are also becoming increasingly critical over wealth managers’ fees, with 33% uncomfortable with rates in 2019. Discomfort is expected to rise as a result of volatile markets. According to the report, more than one in five HNWIs might switch firms in the next year with high fees being the top reason for 42% of HNWIs. HNWIs are also citing a preference for performance and service-based fees over asset-based ones, indicating higher expectations on value delivered for fees charged.
Digital capabilities have become central to business continuity for wealth management firms. Hyper-personalized offerings powered by AI, analytics and other technology can meet the evolving HNWI expectations in areas including:
- Bespoke risk profiles – leveraging behavior sciences and sentiment analysis to interpret individual clients’ risk profiles
- Personalized portfolio construction and tailored advice – data analytics and machine learning to create customized portfolios, assess client behavior to provide tailored advice
- Customized client reporting – using APIs and multiple data sources to create a comprehensive view of client investments
Pre-COVID (Jan-
The BigTech trojan horse
Less-than-stellar customer experience at touchpoints related to information access and value-added services represents a missed opportunity to ‘wow’ clients. More than 40% of the HNWIs interviewed by
While only 26% of wealth managers rank BigTech competition among the top potential disruptors, HNWIs certainly believe that BigTechs can outperform incumbent firms when it comes to information access and value-added services. 74% of HNWIs report a willingness to consider wealth management offerings from BigTechs, jumping to 94% among the 22% of HNWIs who say they may switch their primary wealth management firm in the next 12 months.
HNWIs in
As BigTechs gain financial services ground, wealth management firms have little choice but to enhance digital customer engagement – quickly. A side-by-side look at touchpoints that evoked the least HNWI satisfaction and those most vulnerable to BigTech encroachment reveals three stages of the client journey as areas of focus: acquisition, advisory, and value-added services.
For wealth management firms, a two-pronged strategy based on Open X5 principles will allow wealth managers to quickly and cost-effectively enhance capabilities across the value chain. For acquisition, advisory and value-added services, firms should invest in tech to build capabilities in-house and leverage ecosystem collaboration and WealthTech partnerships to enhance capabilities.
While the immediate focus for wealth managers might be on business retention, building capabilities – both now and in anticipation of recovery – may pave the way to future opportunities and new revenue streams. Successful firms will be those that can harmonize with their ecosystem to quickly meet high net-worth clients’ demand for easy-to-access personalized information and tailored investment strategies.
For more report content, please join The World Wealth Report 2020 LinkedIn Live event presented by
Methodology
The World Wealth Report 2020 covers 71 countries, accounting for more than 98% of global gross national income and 99% of world stock market capitalization. The
About
Group reported 2019 combined revenues of €17billion.
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1 High Net Worth Individuals are defined as those having investable assets of
2https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020
3
4 Ultra-HNWIs have more than
5 Open X leapfrogs the compliance-based approach of open banking and moves to a seamless exchange of data and resources to continually improve customer experience.
Attachment
- 2020_07_09_World Wealth Report
© OMX, source