Wealth in the US: HNW Investors; Understanding HNW investors and wealth management strategies
Summary
The US is the largest wealth market in the world, and home to a diverse and sizable HNW segment. As the population continues to age, building ties with younger generations will ensure successful transfers of wealth to beneficiaries. Less than 25% of client investment portfolios are allocated into bond investments, and with less demand expected in the future more pressure is placed on better returns from alternative investments.
Key Findings
- Almost half of US HNW individuals have gained wealth either as a family business owner or as a first-generation entrepreneur. Greater demand for personalized wealth management services and reaching international markets is expected.
- Gaining access to sophisticated investment products is the number one reason US HNW clients opt to have their wealth professionally managed, while 23.1% believe their portfolio is too complex to manage themselves.
- While more than twice as many HNW clients prefer discretionary mandates over advisory asset management, the latter will display the greatest increase in demand.
- Equities are the main constituent of a US HNW investment portfolio. As expected, alternative investments are gaining importance and make up 26% of an average HNW portfolio.
- Among planning services, financial planning shows the strongest demand. But wealth managers will do well to provide a complete suite of tax planning services.
Verdict Financial’s “Wealth in the US: HNW Investors” report analyzes the investing preferences and portfolio allocation of US HNW investors. The report is based on our proprietary Global Wealth Managers Survey.
Specifically the report:
- Profiles the average US HNW investor in terms of their demographics and analyzes the expat opportunity in the US.
- Analyzes which wealth management mandates are preferred among US HNW investors and how demand will develop looking forward.
- Examines the allocation of US HNW investors’ portfolios into different asset classes and how the allocation is expected to develop in the future.
- Analyzes product and service demand among US HNW investors.
- Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.
- Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors’ drivers for seeking investment advice vs self-directing.
- Tailor your investment product portfolio to match the current and future demand for different asset classes among HNW individuals.
- Develop your service proposition to match the service and product demand expressed by US HNW investors and react proactively to the forecasted change in demand.
- EXECUTIVE SUMMARY
- US HNW clients prefer custom and discretionary approaches to wealth management
- Key findings
- Critical success factors
- PROFILING THE US HNW INVESTOR
- Earned income accounts for the largest proportion of US HNW wealth
- Inheritors are the second-largest segment
- HNW wealth is sourced from financial and technological industries
- Expats account for 5.6% of the US HNW population
- Strict visa requirements limit the expat opportunity in the US
- The increase of US HNW expats from China is notable
- Foreign exchange is the main reason HNW expats move investments to the US
- US HNW INVESTMENT STYLE PREFERENCES
- Greater demand for discretionary mandates is widely forecast
- HNW investors invest a portion of their wealth independently to avoid fees
- UNDERSTANDING ASSET ALLOCATION TRENDS AMONG US HNW INVESTORS
- Current asset allocation is heavily weighted towards equities
- Equity and alternative investments dominate HNW portfolios
- Equity investments make up nearly half of US HNW portfolios
- Bonds represent less than 25% of US HNW portfolios
- HNW individuals shift assets away from cash investments
- HNW client portfolios allocate the least to property investments
- Commodity investments are of little interest to US HNW clients
- Alternatives constitute 26% of the typical HNW portfolio
- US HNW PRODUCT AND SERVICE DEMAND
- Planning services are in high demand in the US
- US HNW individuals show strong demand for pension planning
- Inheritance planning presents an opportunity for wealth managers to resonate with recipients
- A holistic approach to wealth management is key for resonating with the US HNW market
- Tax planning advice is in high demand in the US
- HNW managers should aim to capture market share for investment property services
- APPENDIX
- Abbreviations and acronyms
- Definitions
- HNW
- Liquid assets
- Methodology
- Verdict Financial's 2015 Global Wealth Managers Survey
- Verdict Financial's 2014 Global Wealth Managers Survey
- Bibliography
- Further reading
- About Verdict Financial
- Disclaimer
- List of Figures
- Figure 1: US HNW clients gain wealth through earned income more so than the global average
- Figure 2: US Trust offers families a holistic approach to wealth management
- Figure 3: Property and finance account for almost half of US HNW wealth
- Figure 4: Six out of 10 HNW expat clients are classified as long-term US residents
- Figure 5: 37.6% of HNW expats in the US are from China or the UK
- Figure 6: Almost two thirds of US HNW expat clients invest wealth locally to avoid foreign exchange fees and charges
- Figure 7: Exclusivity and complexity drive HNW clients to seek professional advice
- Figure 8: The majority of HNW wealth is kept in discretionary mandates
- Figure 9: US HNW individuals display strong demand for discretionary mandates
- Figure 10: Demand for discretionary asset management is forecast to increase significantly
- Figure 11: US HNW investors are confident self-managing their wealth
- Figure 12: Equity investments dominate the US HNW portfolio
- Figure 13: HNW investors prefer direct equity holdings
- Figure 14: Capital appreciation drives clients' preference for holding equities
- Figure 15: The majority of HNW bond allocation is held in direct corporate bonds
- Figure 16: Predictability and risk aversion drive HNW bond investment
- Figure 17: Only 6% of managed HNW wealth is held in cash investments
- Figure 18: Reasons of liquidity and risk aversion drive cash investment
- Figure 19: 1% of HNW wealth is allocated to property
- Figure 20: Rental income is fueling HNW demand for property
- Figure 21: The majority of US HNW commodity investment is allocated to funds
- Figure 22: Few investors expect demand for commodity investments to increase
- Figure 23: HNW investors prefer funds when it comes to alternative investments
- Figure 24: Exclusivity and returns drive HNW demand for alternatives
- Figure 25: US HNW individuals show strong demand for pension planning
- Figure 26: The Fidelity Giving Account helps philanthropists pass on their work
- Figure 27: The already strong HNW demand for planning services is expected to increase
- Figure 28: US HNW investors show strong demand for tax planning advice
- Figure 29: Demand for investment property advice is forecast to increase
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