In a prelude to its annual World Wealth Report, which tracks the investing and spending habits of ultra-high-net-worth investors, the consulting firm Cap Gemini Ernst & Young says the super-rich increasingly are behaving like institutions when it comes to their saving and investing activities.
There are a number of implications for advisors, the most important of which is a rising demand for specialized investing services. Advisors who want to serve this group need to be well versed not only in alternative investments, such as hedge funds, but also in art and other esoteric assets.
With the proliferation of investment outlets, anticipating what a particular client needs is getting harder all the time. “That's really the $1 million question,” says Sofia Chappuis, manager at Cap Gemini Ernst & Young, which, along with Merrill Lynch, sponsors the annual report on world wealth.
Some of the ways in which UHNW investors are acting more like institutions include demanding more proactive risk management and longer-term financial planning. Long-term planning is, of course, on the minds of most investors, but the richest are hyperconcerned with how their wealth can stretch across generations.
Many of the large broker/dealers have increased staffing and spending on private wealth management groups designed to cater to the ultra-high-net-worth class of investor (those with at least $10 million in investable assets).
In addition, firms are demanding that advisors who want to work exclusively with ultrawealthy clients attain higher designations, be they recognized degrees such as CFA or CIMA, or internal degrees such as Merrill's Private Wealth Advisor designation.
“It really turns on having to differentiate on the personal connection, as well as with access to the product specialists,” Chappuis says. UHNW investors “don't just want a listing of all the calculations you can give them in a Monte Carlo simulation.”
The annual world wealth report will be released in June.