Wealth managers need to invest in technology, be transparent but imaginative in their offering and segment clients based on more than their level of assets in order to survive the current crisis, according to a new report from JP Morgan Asset Management.

The Wealth Management Report: Meeting the Expectations of UK High Net Worth Individuals explains the challenges facing an industry whose clients are uniquely vulnerable to the combined impact of a property, stock market and banking crash. It reveals the changing demands of a new, "Young High Earning" breed of high net worth individuals and offers advice on how to service them as well as traditional "Asset Rich Elders".

"After a decade of almost continuous growth of serious money in the UK, the wealth management market is facing an unprecedented combination of challenges. Armed with this research of what the high net worth actually want, managers can build an accurate picture how current and future clients can be serviced," the report said. 

"The paper is what prospective clients really want. This insight into the expectations of today's "Young High Earners" will be invaluable for wealth managers in future-proofing their businesses," said Jasper Berens, head of UK retail at the company, in a statement.

JP Morgan Asset Management’s white paper, produced from research of over 200 high net worth individuals and testimonies from within the industry, reveals what existing and potential wealth management clients look for when assessing someone to look after their capital and the qualities and services that will keep them loyal to a firm.

The research found that 80 per cent of Young High Earners, and 60 per cent of Asset-Rich Elders, said the most influential factor when selecting a wealth manager was a personal recommendation or professional referral.

Brand and reputation were also considered more important for both age groups than the size of a firm, suggesting there is a strong market for medium-sized and smaller wealth management firms that "brand" themselves well.

Another important factor cited in the process of choosing a wealth manager was an ability to demonstrate past performance. With virtually no wealth managers currently able to provide this, it seems clients are left to rely on referrals. What appears to have emerged from the survey is that investors looking for wealth managers don't really know how to differentiate between them, or whether they are making a good choice.

This, according to JPMorgan Asset Management, presents a huge opportunity for firms to step up with a clearly differentiated proposition and brand.

Another key finding is that all ages of high net worth individuals are more likely to use an independent financial advisor than a specific wealth management service or private bank. JP Morgan Asset Management recommends that wealth managers can do more to attract this market by differentiating themselves - in particular via empathetic client segmentation.

The report recommends clients need to be assessed and managed not simply by level of assets but by similarity of background, objective and even values and social interests as younger clients seek out firms that offer a high level of personal identification.

The research revealed that high net worth investors want to retain a high level of control in the management of their wealth. The concept of full discretionary investment management, where the wealth manager is left to make all decisions in line with the client's agreed investment parameters and risk profile, is roundly rejected by Young High Earners. Instead, almost 80 per cent of this younger age group favours advisory management where the adviser makes the decisions but the client must be contacted to approve each action.

Older investors are more amenable to giving full discretion to their wealth manager but more still favour the advisory approach.

Regardless of whether investors favoured discretionary or advisory wealth management all respondents were very clear that they expect to see tangible proof of a wealth manager's investment performance. A high number said they wanted to be able to see the performance of existing clients' portfolios or be able to speak to clients with comparable objective about the performance they have achieved.

Performance-based fees are by far the most preferred method of paying for wealth management among both age groups, with commission deducted from product charges coming a distant second.

JP Morgan Asset Management has $1.2 trillion in assets under management as at 30 September 2008 and has offices in 40 locations around the world.