The Futurewealth Report from Scorpio Partnership shows that the wealthy expect 2010 to be a year of growth, but also that they don’t trust their advisers to help them achieve this
The Futurewealth Report from Scorpio Partnership shows that the wealthy expect 2010 to be a year of growth, but also that they don’t trust their advisers to help them achieve this, says Josh Spero
Perhaps it is a keen eye for a strategy, a rising tide carrying all boats or plain wishful thinking, but 78 per cent of the world’s wealthy think that they will grow richer in 2010, according to the Futurewealth Report (download here) from Scorpio Partnership and Standard Chartered Private Bank.
The online survey of 1,414 wealthy individuals also showed that 41 per cent thought their wealth increased in 2009 and 25 per cent thought it stayed the same, despite the difficulties of the year.
Those in the UK were noticeable less confident about their wealth increasing in 2010 (at 72 per cent, against 84 per cent in Central and Eastern Europe); this may in part be attributable to the April 2010 rise in the higher level of income tax from 40 per cent to 50 per cent. Given that 96 per cent said that their job income was a factor in their wealth, this would make sense.
One of the most interesting sets of results in the survey was perception of who was likely to help respondents achieve wealth. The results should be daunting for wealth management professionals: 5 per cent said lawyers, 10 per cent accountants and 10 per cent private bankers, implying that their expensive expertise is not thought useful.
When asked if they would use a financial adviser to make a financial decision, the range of ‘yes’ was 10 per cent (Central and Eastern Europe) to 34 per cent (North America and Middle East/Africa), meaning at least two-thirds would not. Were these figures to be translated into reality, the financial services industry would be facing a damaging crisis of confidence.
Financial advisers were at a more respectable 24 per cent, behind no-one (26 per cent) and a friend (30 per cent). The most revealing answer was that 49 per cent felt that a family member would help them, which could be interpreted as the expectation of a sizeable inheritance or position within the family business, or just indicating the trust felt within families.
Catherine Tillotson, head of research at Scorpio, said advisers would have to work hard to gain their position: ‘The future wealthy are showing a huge amount of confidence in their abilities to generate wealth both in the short term and the long term. There is also good evidence that the role of the private banker, or even the financial adviser, in that journey is not clearly defined. With the future wealthy it is not necessarily about winning back trust, but about gaining confidence in the first place that you can support clients through the the process of wealth creation.’
It emerged that different regions of the world have different aspirations (as well as levels of wealth): those in Contintental Europe expect a fivefold increase (from $1.25m to $7.44m) in the future, while those in Central and Eastern Europe expect just over doubling, but from a higher base ($3.36m to $7.78m). Britons would be satisfied with a fourfold increase ($2.16m to $8.09m), but all geographical groups had a target of $7-8m (except for the Indian Sub-continent: $9.07m).
Most of those surveyed felt that ‘generous’ was the word most people would use to describe them, and a majority said that they would resist the temptation to buy an item which was too expensive, which raises two questions: how expensive must this item be? and what is the role of credit in this?
Recent high levels of personal and commercial leverage would suggest that many of the wealthy had indeed bought too-expensive items, although the claim of those surveyed that their wealth had not been reduced in 2009 implies they may not have been over-leveraged.
On this issue of generosity, Catherine Tillotson said: ‘Certainly the responses show that these wealth creators are as focused on how and why they are making money, as they are on the making money itself. The responses from North America in particular suggest that there is a growing ethical dimension to wealth.
‘For example, internationally, 61 per cent said they wanted to be remembered as a good person. This figure shoots up to 71 per cent for the North American participants. Meanwhile only 6 per cent of North Americans wanted to be remembered for making money, versus 23 per cent in the Indian Sub-continent and 22 per cent in Asia.
‘Given that North America has a major influence on corporate attitudes internationally, the results certainly suggest that we could be on the threshold of a new attitude to wealth creation.’