Industry Surveys
Most HNW Individuals Spread Wealth Between Managers, Dissatisfaction Rises - Studies

Two new research reports suggest that while some high net worth UK clients are willing to give the bulk of their assets to one wealth manager rather than spread it around, most customers were less satisfied with overall service from their providers in 2012 than a year ago.
The portion of UK clients willing to entrust 75 per cent or more of their money to one wealth manager, while still a minority (24 per cent), has risen “significantly” since the 2008 financial crisis but dropped from 2011’s level, according to Ledbury Research, based on a sample of 500 clients with at least £500,000 (around $790,000) of investable assets.
The slight dip in the percentage of people giving wealth to one firm might suggest a greater desire to diversify among providers, due to concerns about the eurozone debt crisis, Ledbury said.
The research sheds light on how, at a time of turbulent markets and highly-publicised stories of banking failures and regulatory failings, wealthy individuals typically spread their money among a number of institutions.
Asked if they were considering raising or contracting funds with main providers over the next six months, some 34 per cent of survey respondents said they were considering an increase, and only 17 per cent said they contemplated a decline.
“When questions arise in HNW individuals’ minds about the security of financial services providers, their natural reaction is to reduce the amount they have invested in any one provider and spread their wealth among more providers – a classic shifting of eggs into more baskets situation,” said Stuart Rutherford, senior analyst at Ledbury.
In a separate study, meanwhile, Ledbury said UK clients of wealth managers have become less happy with the service they get, with satisfaction levels falling back to the same levels as in 2010.
Scoring their main wealth management contacts out of 10, with 1 being “very dissatisfied” and 10 being “very satisfied”, these clients awarded an average score of 7.5, down from 7.9 in 2011 and in line with the average from 2010.
The percentage of HNW individuals with one half or more of total investable wealth with their main provider was 56 per cent in 2012, 54 per cent in 2011 and 42 per cent in 2010.
Some 16 per cent of the population scored their main contact five or less, and there was a sharp drop in the numbers of HNW individuals scoring them 9 or 10.
Not surprisingly, Ledbury said the results are a cause for concern.
We want information
Asked for suggestions as to what main contacts could do to improve client relationships, the suggestion from clients that dominated all others was more frequent and more relevant contact or communication. This response was mentioned by 55 per cent of people who said they had some grounds for dissatisfaction.
“This is an extraordinary level of consensus for HNW individuals. Time and again in our recent research, communication has come up as a key factor in the satisfaction or otherwise of HNW individuals both with their main providers and their main contacts; and it is clear that large parts of the industry are still not getting this right. Of course, the current failings also highlight the difficulties associated with communications, and specifically the complexities of finding the right frequency and nature of communications,” Rutherford said.
Clients suggested improvements such as making more phone calls to customers, more updates and face-to-face meetings. Such clients also wanted “more relevant and clearer information from their main contacts”.
While satisfaction levels with main contacts have declined, “this has not soured HNW individuals' overall satisfaction with their main providers, which is only very marginally down on last year and still up on 2010 levels,” Ledbury said.
“There are a number of issues highlighted ranging from investment performance to difficulty in funds transfer but there are some common themes and take-outs. Lack of communication is identified as the second biggest source of dissatisfaction, garnering 30 per cent of the responses. But the biggest issue – poor investment performance – is also partly linked to a failure in communication, and specifically a failure to set and manage expectations around particular investments,” Rutherford added.