While 88 per cent of advisors questioned for the report said their HNW clients trusted and were confident in their firms – up from 48 per cent taking that view in 2008 – the study also showed no clients believed firms over-achieved in terms of service satisfaction.

“While an air of normalcy is returning to global financial markets, HNW individuals have been deeply impacted by the effects of the crisis,” Adam Horowitz, head of UK, Ireland and Israel at Merrill Lynch, said in a statement accompanying the 39-page report. “Many HNW clients have clearly rethought their investment and life goals, and are now heavily weighing the amount of risk they are willing to assume in order to reach those goals. Firms will need to bring the full force of their capabilities to bear to deliver an integrated approach to HNWIs’ complex post-crisis needs,” he continued.

Perhaps not surprisingly for an employee at the world’s largest wealth management firm by asset size ($1.5 trillion in client balances), Horowitz later told journalists in a briefing that the report also showed that the biggest, integrated businesses were best placed to serve clients’ increasingly challenging needs.

Wealth managers can often provide their owners a relatively stable level of profits, contrasting with trading and investment banking functions, but the industry is also beset by thin margins, affected by developments such as conservative clients’ preference for low-margin cash and similar products after the 2008 crisis, the report said. A segment of wealth management firms surveyed by the report showed that their aggregate pre-tax profit margin dropped by more than 300 basis points from 2006 to 2009, falling by 320 bps in 2010. The burden of new financial regulations and rising compensation costs is squeezing margins the report said.

Alan Walker, head of financial services at Capgemini Consulting UK, agreed that larger, integrated wealth managers with economies of scale could outperform rivals in such an environment. “If we are correct that there are four or five things that clients are demanding, then only the largest firms are well placed to meet this: that is bound also to drive mergers and acquisitions,” he said.

A segment of the report examining how firms can build “enterprise value” or “value levers” focused on how wealth managers can serve clients better. These “value levers” are: “cross-enterprise expert advice teams; unique investment opportunities through the investment bank; preferred financing for entrepreneurs; and advice/expertise from the private bank and investment bank during the wealth-creation process.”

“Many financial services firms have tried to capture and leverage enterprise value before, typically seeking the benefits of synergies, but those attempts have often fallen short,” the report continued.

“Full-service firms are perceived to be far better positioned than pure-play wealth management firms or independent asset management firms to meet current HNW priorities such as capital preservation and effective portfolio management, specialised advice, and more frequent/innovative communication,” it said. For example, 84 per cent of advisors questioned said full service firms were best-placed to preserve capital, while 61.3 per cent said this of pure-play firms, and 59.1 per cent said this of independent asset managers.

Full service firms achieved similarly large margins of approval for effective portfolio management; specialised advice, transparency on statements and fees, asset allocation, independent advice, leverage of enterprise value, innovation and communication, and succession planning.