12/02/2009 - 14:09

Advisors may lose clients in downturn

12/02/2009 - 14:09

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The current economic climate has prompted more high net worth individuals to consider directly managing their investable funds rather than using an advisor, new research shows.

Advisors may lose clients in downturn

The current economic climate has prompted more high net worth individuals to consider directly managing their investable funds rather than using an advisor, new research shows.

The research is from advisory firm East & Partners, which conducted interviews with 881 chief financial officers who each had investable wealth of over $1 million.

East & Partners said that at present, high net worth individuals (HNWI) place 63.8 per cent of their net investable wealth under advice, and directly manage the remaining 36.2 per cent.

However, the financial events of the past twelve months have resulted in a dramatic fall in personal wealth, with over 50 per cent of the HNWIs interviewed saying their net wealth has been reduced by 20 percent or more.

This reduction in net wealth has caused HNWIs to re-evaluate their wealth creation strategies with 72.5 per cent planning to directly manage future investable funds while 27.5 percent said they would use an advisor.

There is also an enormous change regarding where HNWIs intend to park future investable funds. At present, only 6.1 per cent of a HNWIs wealth is placed in cash/bank deposits.

However, were those same HNWIs to have $100,000 in clear investable funds today, an average of 67.9 percent of it would be placed into cash / bank deposits.

"These results clearly illustrate that the investment landscape has changed significantly. The events that have rocked financial markets around the world in the past year have dramatically eroded the personal wealth of HNWIs. As a result it appears that HNWIs have simply lost confidence in their current wealth advisors," East & Partners' head of market analysis, Robert Morgan said.

"Our research shows that only a very small percentage of HNWIs place their wealth creation in the hands of their business bank. However, with HNWIs being disillusioned with their current advisor, a clear opening exists for the major domestic banks to assume the mantle of HNWI 'trusted advisor' and significantly grow their private banking business units."

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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