Investor trust in the financial services may be slowly returning, but high-net-worth clients are less satisfied about their overall relationship with their wealth advisors—giving them a score of 63 percent (out of 100) on performance.
In the 2014 World Wealth Report produced by Capgemini and RBC Wealth Management , high-net-worth investors’ trust levels worldwide increased by 13.5 percent over the past year, due in part, to better equity markets and an brighter investment outlook.
Specifically, the report found global wealthy clients’ trust and confidence in their wealth manager reached 74.7 percent and 76.4 percent overall for firms.
But while trust may be returning, high-net-worth investors gave firms significantly lower performance scores on managing the overall relationship. The survey—which included 4,500 individuals from over 23 countries with more than $1 million in assets—asked wealthy individuals: “On a scale of 0-100 percent, thinking about your overall relationship with your main wealth manager, what performance score would you give them?”
Globally, performance scores dropped by 4 percentage points to 63 percent last year. North American firms saw the biggest drop, down 6 percentage points. And yet, the region continues to have the highest overall score (72.9 percent), while Japan has the lowest (45.5 percent). Only firms in the Middle East and Africa, as well as Asia-Pacific (excluding Japan) saw increases in their performance—2.4 and 0.5 percentage points, respectively.
Ultra wealthy clients with more than $20 million in assets were even less satisfied, giving their firms a 64.6 percent performance score, a decrease of 8.6 percentage points from 2013’s 73.2 percent score. Whether this drop in satisfaction is a trend or a outlier remains to be seen, as this is only the second year the study has been fielded.
Janet Engels, senior vice president and director of private client research for RBC Wealth Management, says the broadness of the question may have contributed to wealth managers’ performance score being less positive than last year, but it's still something firms should keep in mind. Part of the drop could be traced back to recent regulatory changes, Engels says. Even though firms are supportive of regulation, the change can be disruptive. “The change in regulations and the regulatory environment can sometimes have unintended consequences on the overall client experience,” Engels says.
Technology and digital integration may also influence firms’ performance score. The study found two-thirds of high-net-worth clients would consider leaving their firm if they could not perform transactions digitally.
“All aspects of high-net-worth clients are interested in digital,” she says, noting the study breaks down fallacy that only younger clients are interested in technology enhancements. Moreover, 64.2 percent of wealthy investors say they want to see their wealth management relationship to be conducted via digital channels in five years.
Firms’ performance and their ability to satisfy high-net-worth clients is becoming increasingly important, especially as the number of wealthy investors continues to rise. The report found 2 million people joined the ranks of the global millionaires club in 2013, putting the total high-net-worth population at 13.7 million (up 15 percent from the 12 million reported in 2012).
Perhaps more importantly, these wealthy clients are increasing their international and alternative investments—decreasing their cash holdings by almost 2 percentage points from last year. And ultra high-net-worth investors are shifting away from wealth preservation into wealth growth, the study found. Specifically, investors with more than $20 million in assets say their focus is on wealth growth increased to 30.7 percent, up from 18 percent in 2013.