Over 65% of independent wealth advisors (IWA) are increasingly selecting discretionary fund managers that provide them with a more active role in the shaping of their investment proposition, according to independent industry insight on 40 institutions across UK, Hong Kong and Singapore markets
Over 65% of independent wealth advisors (IWA) are increasingly selecting discretionary fund managers that provide them with a more active role in the shaping of their investment proposition, according to independent industry insight on 40 institutions across UK, Hong Kong and Singapore markets.
The advisors, who collectively manage in excess of USD8 billion, cited top reasons for this trend include the changing regulatory landscape (such as RDR in the UK), a desire to target higher net worth clients, pressures on margin protection and a need to demonstrate better involvement in the investment process to merit their value.
This trend will be a stark reminder to investment managers that IWAs will not just purely be a passive distribution arm to end-HNWs. “The advisors surveyed recognise that a proactive involvement in the investment process will support their ability to charge better fees to their premium clients,” said Sebastian Dovey, managing partner at Scorpio Partnership.
This core finding was part of a research program in the first quarter of 2011 that was conducted on behalf of Momentum Global Investment Management, a specialist global investment manager concentrating on the UK and APAC HNW markets.
The research outlined a number of additional key insights into the issues between independent wealth institutions and asset managers. These include:
1. Over 80% of independent wealth advisors are in the final stages of converting their fee-based business model in anticipation of RDR.
2. There is a clear trend in favour of goals-based wealth management which takes account of both the investors’ financial assets and liabilities.
3. 78% of advisors currently use multiple platforms to carry out their private client business but all accept they would prefer a single common platform to streamline their activities.
4. Advisors have seen their top line asset-based fee revenues reduced from 150 to 100bps in the past 24 – 36 months. They expect this trend to continue and reach 75bps by 2013 – 2015.
5. Firms seeking to increase business volume from the HNWs must upgrade their product capability to offer tax-efficient investments through SIPPs, insurance-linked investments and QROPS (Qualifying recognised overseas pensions schemes).
The research process also re-affirmed the broadly accepted trend that independent advisors shifting to a fee-based model are actively upgrading their market segmentation to move into either the upper end of the mass affluent sector (typically individuals with GBP250,000 in net investable assets) or the HNW sector (typically individuals with GBP1m in net investable assets). “The economics of the wealth management advisor model is such that it is not truly viable for client business with assets below GBP250,000.” noted Dovey.
Momentum Global Investment Management undertook the research as part of a progressive thought leadership program being implemented to deepen their industry knowledge of the state of play in the market. The full key findings of the research are available at Momentum and Scorpio Partnership on request.