Wealth in the US: HNW Investors; Understanding HNW investors and wealth management strategies

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

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.

Synopsis

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.

Reasons To Buy

• 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.