Last year saw the ranks of the world's jet set, and their millions, finally surpass pre-crisis levels. But because of the nosedive they took in 2008, they now have more complex demands than ever before. And advisors had better be prepared to provide a more highly integrated package of services, according to a new study.
The 15th annual World Wealth Report from Merrill Lynch Global Wealth Management and Capgemini takes the glass-is-half-full approach, saying there is good news and better news after the crisis.
The survey of the high-net-worth individuals—those with investable assets of $1 million—found that rich sliver of the population grew 8.3% to 10.9 million last year. And their assets climbed to $42.7 trillion. (Pre-crisis high was $40.7 trillion.)
And the ultra—high net worth population—$30 million and more—rose 10.2% while its wealth climbed 11.5%. Those increases are the good news.
Even better is that the significant majority of them say they have trust and confidence in their wealth management advisors and their firms. That's a significant improvement from 2008, when nearly half the shell-shocked respondents said they had lost trust in their advisors and firms. But high-net-worth clients are still relatively cautious in their asset allocations, with large slugs in fixed income and cash.
So three years later, what's changed? For a start, large numbers said capital preservation was "extremely important" (42%) or "important" (46%). At the same time, effective portfolio management was "important" to 49% and "extremely important" to another 30%.
These still-nervous well heeled clients have new priorities, including a desire for specialized advice, "important" to 48% and "extremely important" to a further 25%.
This means advisors must provide a higher degree of responsiveness and flexibility than in the past. It will be critical to combine abilities from across an advisor's firm, including the corporate, private or investment bank.
The good news for bank-based advisors is that they've got a head start on those at boutique investment firms or pure wealth managers. "Post crisis, there's been a fundamental shift in providers, many of the advisors are part of banks," said John Thiel, head of US Wealth Management and the Private Banking & Investment Group at Merrill Lynch Global Wealth Management. "Either you have the capability or are gaining the capacities to be relevant to clients across the whole wealth management spectrum—investment management, banking, liquidity and lending, as well as wealth structuring [estate planning].
What the clients are saying to us is, 'We like our relationship with you very much. We have confidence in you, that confidence has been regained for the most part since the crisis. If you have those capabilities we'd love to work with you, but you've got to tell us about them,'" Thiel said.
He said the report found that many clients have been unsatisfied with their access to services. For example, they would like help from the investment bank with selling their businesses, or the commercial bank with liquidity needs. "The client wants to leverage the relationship across the entire entity, and they want the introduction to come through their advisor," Thiel said.
If clients do not ask what the organization can do for them, Thiel said advisors must tell them. An easy way to introduce new ideas is at the quarterly or semi-annual review.
He suggested breaking the topics into separate meetings, because, "We know there's only so much information clients can take in at once." He suggested starting with banking or investments, probably using retirement or cash flow as a jumping-off point. Then he suggests moving into other areas like mortgages or other debt, and saving the wealth structuring piece until the last.
William Sullivan, Global Head of Market Intelligence at Capgemini, said that after years of working to leverage all parts of an organization with an eye to synergies, what's different this time is that efforts should be client-driven.
"Advisors should really think about where client demands are: preferred financing for entrepreneurs, unique investment opportunities through the bank and leveraging the expertise of private banking during the wealth creation element as well as expert advice across the units," Sullivan said.