An average of two-thirds of assets under management is held within advisory accounts, according to a new report.
Ernst & Young LLP, New York, publishes this finding in a study that explores current and emerging trends in wealth management, including risks and challenges that financial professionals face.
Within the high net worth market, 69% of assets under management are held in advisory accounts, versus 31% in commission-based accounts. In the mass market, the percentages are 57% and 43%, respectively, the study reports.
Nearly all (92%) of the wealth management firms Ernst & Young interviewed offer mutual funds, and three in four (73%) offer ETFs. The disparity between ETFs and mutual funds sold, the study says, may reflect the “maturity” of the two markets.
Two in three (63%) wealth managers offer hedge funds/private equity, and about half offer structured products, the study adds. The demand is greater among those firms targeting high-net-worth clients, and their outlook for asset growth aligns — those targeting high-net worth clients are significantly more optimistic about growth in AUMs for alternative investments than their mass-market counterparts.
Nearly all (95%) wealth management firms offer managed accounts, but just half offer unified managed accounts, the report says.
For those firms that actively sell managed accounts, nearly 40% of the wealth management firms expect annual growth in AUMs to exceed 15%.
Six-two percent of product strategy and product management professionals at wealth management firms say they expect emerging market equities to be the best-performing asset classes over the next two years. This compares with 54% of respondents who identify US equities.
The report adds more firms focused on the mass-market client segment report they expect equities to be among the best-performing asset classes than firms focused on high-net-worth clients.
“This survey finding was not a suprise, as these alternative products typically require higher minimum investments, charge higher fees, and are generally targeted to clients with higher risk profile than more traditional offerings, making them a better fit for High Net Worth clientele,” said Anthony Caterino, partner, with the company’s Financial Services division.
“However, it does suggest, that for wealth management firms to be competitive in attracting assets from this High Net Worth client base, they will need a robust alternative product line up to compete with the established players in this segment.”
For a comprehensive look at the entire study, please read it here.