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Advisory Asset Management: HNW Demand and Drivers

Advisory Asset Management: HNW Demand and Drivers

Summary

Globally over 25% of HNW individual’s portfolio is invested via advisory services, with markets in Asia Pacific displaying the strongest affinity for these mandates. Although discretionary services remain the preferred option – particularly in developed markets – global HNW demand for formal advice is expected to increase in light of capital markets volatility. Wealth managers should use advisory mandates offering to capitalize on this demand to draw assets from execution-only platforms.

Key findings

  • Emerging markets show a greater propensity for advisory services than developed countries. Taiwan has the highest penetration of advisory mandates, with 71.2% of the HNW portfolio held in these services.
  • The US HNW advisory asset management market is worth $1.5tn, representing the greatest opportunity in absolute terms. China is the second-largest market, followed by Australia.
  • On the global level, the balance between access to advice and retaining control over investments is the main factor fueling HNW demand for advisory mandates, although regional preferences vary.
  • The second most important reason is price sensitivity. When cheaper than discretionary mandates, advisory services are likely to appeal to HNW investors.
  • As competitive pricing fuels demand for robo-advice, most wealth managers agree they should invest in automated investment services to complement their existing offering.
Critical success factors
  • Leverage market volatility – Increased market volatility motivates investors to seek professional management – especially those who lack the knowledge and time to manage their portfolio. For HNW investors who are hesitant to place full control in the hands of a professional, wealth managers will do well to offer advisory services.
  • Embrace technology – Robo-advisors are piquing the interest of HNW investors for their digital platform capabilities and competitive pricing. Incumbent wealth managers will do well to embrace technology by launching their own digital services and leveraging their brand familiarity and relationships with existing clients.
The report “Advisory Asset Management: HNW Demand and Drivers” provides detailed analysis of HNW investors’ preferences and attitudes towards advisory asset management services across the globe.

In depth, it provides the following -
  • Estimates the value of HNW assets invested via advisory mandates.
  • Compares HNW individuals’ willingness to use advisory services in different countries.
  • Identifies target client groups for advisory asset managers.
  • Compares drivers for advisory mandates between countries and regions.
  • Examines the client targeting strategies of advisory portfolio managers.
  • Explores robo-advisors’ potential to disrupt traditional discretionary asset management business.
  • Analysis about competitive landscape.
Companies mentioned in this report: Bank of Singapore, BNP Paribas Wealth Management, Charles Schwab, Citibank, Credit Suisse, Hargreaves Lansdown Asset Management, HSBC Private Bank, JP Morgan Chase, Julius Baer, Merrion Capital, OCBC, Rathbones, RBC Wealth Management, Rowan Dartington & Co, Seven Investment Management, UBS Wealth Management, W H Ireland, Walker Crips Group.

Scope
  • Emerging markets show a greater propensity for advisory services than developed countries. Taiwan has the highest penetration of advisory mandates, with 71.2% of the HNW portfolio held in these services.
  • The US HNW advisory asset management market is worth $1.5tn, representing the greatest opportunity in absolute terms. China is the second-largest market, followed by Australia.
  • On the global level, the balance between access to advice and retaining control over investments is the main factor fueling HNW demand for advisory mandates, although regional preferences vary.
  • The second most important reason is price sensitivity. When cheaper than discretionary mandates, advisory services are likely to appeal to HNW investors.
  • As competitive pricing fuels demand for robo-advice, most wealth managers agree they should invest in automated investment services to complement their existing offering.
Reasons to buy
  • Discover how much HNW wealth is invested via advisory mandates.
  • Identify markets offering the greatest growth potential for advisory asset management.
  • Learn why HNW investors choose to opt for advisory services, and how these motivations differ between countries, particularly in emerging and developed markets.
  • Gain an insight into best-practice examples from competitors operating within the advisory mandates landscape.


  • Executive Summary
    • Market volatility will drive demand for advisory mandates
    • Key findings
    • Critical success factors
  • Sizing the Global Market for Advisory Asset Management
    • Defining advisory asset management
    • Wealth managers offer a range of asset management solutions to cater to HNW investors
    • More than 25% of HNW wealth is managed using advisory mandates
      • Table Figure 1: Advisory mandates are less popular among HNW individuals than discretionary services
      • HNW investors in Asia Pacific place the largest proportion of their wealth in advisory mandates
        • Table Figure 2: Over a third of HNW portfolio wealth in Asia Pacific is held in advisory mandates
      • Advisory asset management is a more prevalent service in emerging markets
        • Table Figure 3: Taiwan has the highest advisory mandate penetration among emerging markets
      • Developed markets hold a below-average proportion of wealth in advisory mandates
        • Table Figure 4: HNW investors in Australia hold the majority of their wealth in advisory mandates
    • The global HNW advisory asset management market is worth $7.6tn
      • The value of the HNW market will continue to expand with growth in assets
        • Table Figure 5: Double-digit growth is forecast among HNW individuals with liquid assets exceeding $10m
      • The US holds the greatest value of assets placed in advisory mandates
        • Table Figure 6: Globally, the US is the largest opportunity for advisory asset management
    • Demand for mandated services will increase
      • Wealth managers expect the greatest demand increase for advisory asset management
        • Table Figure 7: Wealth managers expect demand for advisory mandates to increase
      • Demand for advisory services will rise the most in regions with an already high preference
        • Table Figure 8: The majority of wealth managers globally expect demand for advisory mandates to increase
  • Drivers for Advisory Asset Management
    • Advisory services appeal to offshore investors and businessmen
      • HNW offshore investors are likely to opt for advisory mandates
        • Table Figure 9: Offshore investors have a strong appetite for advisory mandates
      • Family business owners and first-generation entrepreneurs support demand for advisory mandates in emerging markets
        • Table Figure 10: HNW individuals in emerging markets are more likely to work as a family business owner or first-generation entrepreneur than those in developed markets
    • HNW investors value time and monetary resources
      • The most common driver behind demand for advisory services is a balance between guidance and control
        • Table Figure 11: Maintaining the right balance of guidance and control is key for HNW individuals who hold wealth in advisory mandates
      • Drivers for advisory mandates vary among regional markets
        • Table Figure 12: HNW investors in Asia Pacific are the most likely to choose advisory mandates because they want guidance but also the ability to retain control
        • Table Figure 13: HNW investors in Europe and the Middle East & Africa are the most reluctant to hand over complete control to their wealth manager
  • Understanding the Competitive Landscape
    • The majority of wealth managers currently offer advisory services
      • Advisory services are often offered alongside discretionary mandates
        • Table Figure 14: Most wealth managers offer their clients advisory services
      • HNW investors have a range of options for pursuing advisory mandates
        • Table Minimum investment thresholds for advisory services of selected providers in the UK
    • With the increasing use of technology, the way investment advice is delivered has been changing
      • Robo-advisors revealed the benefits of the digital channel
        • Table Figure 15: Globally, wealth managers agree that investing in automated investment services can complement an existing offering
  • Appendix
    • Abbreviations and acronyms
    • Definitions
      • Developed (mature) economies or markets
      • Developing (emerging) economies or markets
      • HNW
      • Liquid assets
      • Mass affluent
      • Mass market
      • Robo-advisor
    • Methodology
      • Sizing the market for advisory asset management
      • GlobalData's 2016 Global Wealth Managers Survey
      • GlobalData's 2015 Global Wealth Managers Survey
      • Exchange rates
        • Table US dollar exchange rate, December 31, 2016
  • Bibliography
    • Further reading

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