Product and service needs of wealth management clients

Overview 1
Catalyst 1
Summary 1
Methodology 2
Executive Summary 3
The downturn has fundamentally increased the weighting of safer products within HNW portfolios and raised demands for discretionary asset management 3
HNWs' investment behavior is being shaped by their changing nature and attitudes 3
Wealth managers expect defensive products and advisory services to be in most demand in the next two years 3
Datamonitor believes higher risk products will come back strongly by 2011 and that advice will top the list of HNW service demands 3
Table of Contents 5
Table of tables 6
CURRENT PRODUCT AND SERVICE NEEDS 7
There has been a global movement towards lower risk assets in the wake of the economic and financial meltdown 7
HNW portfolios in Europe and Asia Pacific are now strongly weighted towards the safer asset categories 7
Current portfolios are skewed towards very low risk product areas 9
European HNWs have large amounts invested in cash and near cash, and fixed income products 10
Asia Pacific HNWs have large amounts invested in cash and near cash, and equities 13
The services in demand by HNWs reflect the economic and market turbulence that has been in evidence 15
HNWs across Europe and Asia Pacific are looking for wealth managers to provide services that assist them through these troubled times 15
Discretionary asset management services are very much in demand in Europe at the present time 17
In Asia Pacific, HNWs are looking for hand holding and advisory asset management services 19
The changes in investment allocations are the result of changes in the nature and attitudes of HNWs 21
HNWs' appetite for risk is a key influencer of the asset mix in HNWs' portfolios 21
Knowledge of products is strongly correlated with the relative importance of different product categories 23
FUTURE PRODUCT AND SERVICE NEEDS 26
HNWs are expected to continue to play it safe in the next two years, while demanding advisory services 26
Capital protected products, and deposits and savings products will be in most demand in the next two years, according to wealth managers 26
The current turmoil is expected to shape the service needs of HNWs in the next two years 31
Datamonitor believes that higher risk products will have made a strong return by 2011, and agrees that advice will top the list of service demands 35
Datamonitor expects stock market recovery to commence in 2010 and HNWs to return en masse to high risk products by 2011 35
Datamonitor agrees with wealth managers that HNWs will be in search of advice over the next two years 36
Examples of innovations in promising product and service areas 36
Examples of product innovation 36
Innovative example of capital protected products: new capital protected product allows investors to lock in profits 36
Innovative example of capital protected products: Macquarie offers leverage within its capital protection product 36
Innovative example of capital protected products: Barclays Wealth offers commodities protected investment 37
Innovative example of savings products: Investec successfully attracts depositors through innovation 37
Innovative example of property funds: Grindrod offers a property income fund that looks to offer market-beating yields 37
Examples of service innovation 37
Innovative example of tax and financial planning: UK IFA firm launches Advanced Wealth Management 37
Innovative example of tax and financial planning: Skandia launches new financial planning tool 38
Innovative example of execution services: UBS launches real-time transaction cost analysis in Europe 38
Appendix 39
Definitions 39
The drivers of growth in the wealthy population 39
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 39
Investment returns (market capitalization, interest rates and bond yields) 39
The following measures are not, in themselves, drivers of wealthy population growth 39
Market capitalization 39
GDP 39
The following measures are not drivers of wealthy population growth except under very restricted circumstances 40
Primary residence value growth 40
Inheritance 40
Methodology 40
Wealth Management Market Leaders Survey 2009 40
Bibliography 40
Further reading 41
Ask the analyst 41
Datamonitor consulting 41
Disclaimer 41
List of Tables
Table 1: Year-on-year change in the asset categories (percentage points) 9
Table 2: HNWs' portfolio allocations by product area 10
Table 3: European HNWs' portfolio allocations by product area now 13
Table 4: Asia Pacific HNWs' portfolio allocations by product area now 15
Table 5: Services currently in demand by HNWs 17
Table 6: Services currently in demand by European HNWs 19
Table 7: Services currently in demand by HNWs in Asia Pacific 21
Table 8: Appetite for risk among HNWs in 2008 and 2009 22
Table 9: Correlations between HNW knowledge of products in 2009 and the percentage of their portfolios in particular products in 2009 24
Table 10: Expected HNW demand for the following product areas in the next two years 27
Table 11: Expected HNW demand in Europe for the following product areas in the next two years 29
Table 12: Expected HNW demand in Asia Pacific for the following product areas in the next two years 30
Table 13: Expected HNW demand for the following service areas in the next two years 32
Table 14: Expected HNW demand in Europe for the following service areas in the next two years 33
Table 15: Expected HNW demand in Asia Pacific for the following service areas in the next two years 34
List of Figures
Figure 1: Both regions have seen a sharp contraction in the relative proportion of real estate investments 8
Figure 2: HNWs have much more defensive portfolios than in 2008 10
Figure 3: Cash and near cash makes up the biggest proportion of European HNWs' portfolios 12
Figure 4: Across Asia Pacific, the proportion of HNWs' portfolios held in equities has not changed much in 2009, compared to 2008 14
Figure 5: The recent volatility is a key determinant of what services are in demand 16
Figure 6: Asset management demands are polarized around discretionary and execution-only services 18
Figure 7: More hand holding is much in demand in Asia Pacific 20
Figure 8: HNWs' appetite for risk has fallen sharply from 2008 to 2009, corresponding with the rebalancing of their portfolios away from riskier assets 22
Figure 9: Stock market performance and HNWs appetite for risk are correlated 23
Figure 10: Wealth managers have very different views about what the future will hold for products 27
Figure 11: European wealth managers think capital protected products will be the real winner in the next two years 28
Figure 12: Wealth managers in Asia Pacific identify deposits and savings as looking particularly promising 30
Figure 13: Wealth managers in Asia Pacific expect big take up of execution only asset management, while European wealth managers think discretionary asset management will be the big winner 32
Figure 14: There will be good demand for ancillary wealth management services in Europe 33
Figure 15: Wealth managers in Asia Pacific expect a lot of country-specific variations in HNW service demands 34