Private Banking Directory

Wealth managers split on whether high-net-worth investors take primary role in investment decisions or are happy to accept advice in strategic management of their portfolio

PUBLISHED : Tuesday, 28 June, 2016, 12:00am
UPDATED : Wednesday, 06 July, 2016, 12:46pm

Wealth managers are divided on the issue of high-net-worth investors (HNWIs) taking a more primary role in their investment-making decisions. Morgan Stanley Private Wealth Management and Campden Wealth Research highlight advisers' continuing significance in portfolio policy in their "Family Decision-Making" report, released in April.

Financial advisers "have a bigger role in investment decision-making for North American ultra-high-net-worth families than any other family member, group or committee", according to the study of 59 individuals from families with net worth in excess of US$25 million. The research found a professional financial adviser is engaged in "41 per cent of cases for overall asset allocation, and a family adviser or family office executive in 38 per cent".

These same non-family members help make decisions about specific opportunities in 44 per cent and 35 per cent of cases respectively, and to divest in vehicles or companies 41 per cent each of the time, the study says. And 89 per cent of its respondents said their wealth advisers had a strong (50 per cent) influence or some (39 per cent) influence, the report says, adding: "This was higher than any other stakeholder, inside or outside the family."

However, critics might say China's wealth culture is different. Deloitte's 2015 study "10 Disruptive trends in wealth management" reveals the "new thinking patterns" of the "Re-wired Investor", who are generation X, Y and Y2, and teched-up baby boomers who might be increasingly used to "robo" or digitally-based advice that might dilute or compete with existing relationship-based services.

The Re-wired Investor expects more tailored "just me" treatment on specific goals and "want to stay in control of their financial lives and understand the advice they receive and make the important decisions themselves", Deloitte says. "Increasingly comfortable conducting their own research", the Re-wired Investor "is more sceptical of authority than previous generations", the report says. "She believes in the wisdom of her peers."

Such sentiments have long been established in Hong Kong. David Ji, head of research, Knight Frank Greater China, says his HNWI clients tend to consult each other with investment ideas, from arts and yachts to football clubs and vineyards.

"They circulate in this elite group and decide [whether] to do it," he says. "They take a reference from each other. They stick to themselves in managing their money."

The local rich still largely "take a primary role" in their portfolios, he says. "Advisers are basically executing their wishes."

Reto Marx, UBS managing director and regional head, financial intermediaries Apac, has a "different view", however.

"In HK there are more clients who are entrepreneurs and they monitor stock market closely as part of their business, hence they know the markets better. What they are looking for is advice in the strategic management of their portfolio."