Client expectations of their wealth managers have changed significantly over the past decade, with the industry adapting product and service suites for a new generation of wealth creators.
Client expectations of their wealth managers have changed significantly over the past decade, with the industry adapting product and service suites for a new generation of wealth creators.
The industry is still growing, and fast. The wealth of high-net-worth individuals is expected to grow by 6% annually, while over the next 15 years those older than 65 with investable assets of more than USD1 million are expected to increase sevenfold. This wealth is being passed on, with a staggering USD41 trillion expected to be transferred between generations over the next 50 years.
This growing population not only expects the more ‘traditional’ wealth management services of wealth preservation products and estate planning, but also a level of sophisticated asset allocation that the new breed of millionaires have championed.
BRIC economies (Brazil, Russia, India & China) are among those that have experienced a rush of sudden wealth in recent years. Countries such as India, with a GNP growth rate averaging at 8 per cent, are creating more millionaires every year than many of their western counterparts. These Internet savvy entrepreneurial millionaires expect something very different from their wealth providers than simple estate planning and expensive lunches – a change in attitude to greater sophistication that is being mirrored, if at an ironically slower pace, in more advanced markets.
Exceeding expectations through responsive, dynamic client reporting The informed client & diversified products The increased sophistication of this new generation of clients is evident in the types of products sought, the level of risk tolerance, and the way that clients expect to view, monitor and manage the performance of these products.
Greater sophistication can clearly be seen in the asset allocation of clients.
In 2005, assets under management (AUM) in traditional equity and balanced strategies declined, while higher-alpha and cheap-beta strategies grew at an average rate of more than 20 per cent. Indeed, many private banking institutions are now following a policy which ensures that at least 10 per cent of a client’s portfolio are held in alternatives.
Taking more risk is not the goal here; the aim is to use innovative and clever strategies to diversify risk and return in a portfolio. Clients still expect accurate pricing and performance information on these ‘alternative’ investments – just as they expect with their more traditional stocks and bond based investments.
It is here that wealth managers face one of their biggest challenges. What do they do when clients expect on-demand, real-time, single-view reporting on such a diverse range of assets and allocations – which their systems are not used to dealing with?
Delivering this next generation of rich, dynamic and holistic client reporting tools across the myriad of new investment products offers wealth managers clear competitive advantage, while ensuring that critical regulatory considerations are met.
Read the latest IBM report on "Next-Generation Wealth Management"
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