A report says it is becoming clearer that investors at different stages of life seek contrasting types of financial relationships.

Adding to a raft of industry studies aiming to uncover emerging high net worth preferences and trends, a new global report notes that it’s becoming increasingly clear that investors at various stages in their lives and levels of wealth look for different types of financial relationships.

The global study of 3,025 wealthy individuals - with an average net worth of $2.6 million - is part three of this year’s Futurewealth Project by SEI, Scorpio Partnership and NPG Wealth Management. The series defines the future-wealthy as those “at the front of a global charge up the wealth curve.”

The latest paper, entitled The Futurewealth Report 2014: Enhancing the customer service curriculum, unpicked factors that boost client loyalty and asked respondents, among other significant questions, whether they think their wealth manager understands their financial goals.

While 64 per cent of respondents globally reported that their main money manager has a good knowledge of their core financial needs, a worrying third don’t believe their advisor understands their product or service preferences.

Satisfaction levels were higher in the Americas, where nearly eight in ten HNW investors trust that their wealth manager understands their financial needs, spanning the areas of wealth objectives (80 per cent), total financial picture (78 per cent), product and service preferences (79 per cent), and attitude to risk (79 per cent).

Peter Keuls, global head of wealth management at McLagan, the performance and rewards consultancy, attributed this to “significant cultural differences when it comes to both the American client and the American wealth management market.”

He told Family Wealth Report: “From the customer perspective, Americans can be more culturally inclined to be vocal in praise and criticism which can generate more extreme scores. They are also more comfortable discussing wealth which can result in a higher propensity to refer and associated net promoter scores.”  

He added: “From the business perspective, the size of the US wealth market enables a great range of providers and more choice than is found in many global markets that are dominated by large national banks. The size and scale of the customer base has enabled American wealth managers to develop a thorough understanding of the client from both a data perspective and a relationship perspective and financial planning processes that when effectively executed can deliver more satisfactory client outcomes.”

Trends
Overall, the paper identifies clear opportunities for wealth managers to expand their client base, but also significant challenges to keep in mind.

For example, it was found that “satisfaction wanes as wealth grows,” with those individuals with over $4 million net worth rating their money manager 16 marks lower than those with less than $500,000 when it comes to providing “customer-focused service.”

Meanwhile, it emerged that client segmentation also affects “future-wealthy” motivations in terms of maintaining partnerships with their current wealth managers. Indeed, it is no secret that wealth management firms are more profitable if they evolve with and ahead of their clients, with enhanced client segmentation strategies helping to drive this.

Among the wealthiest respondents, just 13 per cent reported staying with their provider for “any one motive.” The top reasons were then split between: having the solutions and services to meet financial needs (13 per cent); good portfolio performance (12 per cent); and good advice, company reputation, and company strength or stability, each at 11 per cent. Among those with less than $500,000 in net worth, portfolio performance was the predominate factor for continuing the relationship.

Ryan Hicke, senior vice president, SEI Wealth PlatformSM, said it’s becoming more apparent that investors at various stages in their lives and levels of wealth look for different types of financial relationships.

Echoing this, according to a recent SEI white paper, many wealth managers would benefit from restructuring their client segmentation model to account for investor behavior patterns; while the wealth management industry has traditionally viewed clients through three “static” lenses - level of wealth, source of wealth and age of wealth – SEI believes a more “dynamic” segmentation type has emerged.

“While this knowledge provides wealth managers with an opportunity to broaden their client base through a diversified offering, it also creates a challenge. In order for wealth managers to increase the time spent learning about and interacting with clients, they must find a way to streamline transactions and add efficiencies to other areas of their business,” Hicke said in The Futurewealth Report 2014: Enhancing the customer service curriculum.

Capturing wealth and enhancing client relationships
Meanwhile, the report showed that the future-wealthy have partnered with their main wealth manager for an average of 14 years and currently have 51 per cent of their assets with their primary manager.

However, those who have been with their main manager for five years wouldn't consider consolidating more than 45 per cent with a single wealth manager.

Yet the report also unearthed “a pattern of larger consolidation over time.” For instance, according to the data, assets held at a wealthy manager increase by 18 per cent over a 20-year relationship – an interesting finding given the observation that satisfaction wanes as wealth grows. This, SEI said, presents an opportunity for managers to grow their businesses organically by “proving their value.”

“The commercial reward for wealth managers who maintain a consistent ongoing relationship with their client is very real so long as they continue to meet client expectations,” said Sebastian Dovey, managing partner at Scorpio Partnership.

“These findings highlight why wealth managers need a clear picture of their customer experience. It is crucial for future growth,” Dovey added.

Of note, respondents ranked client focus as the most important element of their experience with a wealth manager, receiving an importance score of 65 out of 100. For example, it was also found that they want to learn, with access to regular communication, information and engagement, Scorpio said.

Broadly speaking, respondents gave an average index score of 78 out of 100 for their managers’ client-centricity, and statements and reporting. However, these “confident consumers” feel that their wealth managers could do a little more for their continued custom, the report said.

Highlighting this, loyalty schemes were given performance scores of below nine and invitations to lifestyle and events below 19.

Looking at the regional trends, it was found that HNWIs in Europe are “particularly negative” in this respect, while those in Asia-Pacific feel their wealth managers are doing slightly better at providing the “little extras that enhance the relationship.”