Add to the challenges facing wealth managers the possibility that they are misperceiving the motivations of their affluent clientele.
New research from Scorpio Partnership finds that whereas wealth managers tend to assume family comes first in matters of wealth creation and management, high-net-worth families give nearly equal weighting to family, civic duty and wider social issues in their approach to wealth creation.
When advisors focus on the individual client and consider social responsibility from the perspective of self and family first, “they may well be missing the whole person in front of them,” the report said.
Scorpio in February surveyed 250 multi-millionaires in the U.S., Germany, Russia and the U.K. with an average wealth of $3.5 million. The findings were incorporated into the inaugural issue of the Kaiser Partner Special Report Series. Kaiser Partner is a wealth management firm based in Switzerland and Lichtenstein.
The research found—not surprisingly—that securing the family’s financial well-being was the respondents’ top priority, along with ensuring children shared family values.
But close behind were civic duties: operating within international law, conducting business fairly, obeying industry regulations and paying taxes.
And a desire to engage in activities that give something back to society had a nearly equal footing, the report said. These included engaging in civil society, investing ethically, environmental responsibility and charitable activity.
For their part, traditional wealth advisors in the survey overestimated the importance of securing the family’s financial future and significantly underestimated “the urge of wealth creators toward wider altruism.”
Not only did wealth creators emphasize wider altruism more than their advisors acknowledged, but also their consideration for family and their fellow human beings extended far beyond that. They told researchers that in order to achieve their full potential as a wealth creator, they had most room to grow in the realm of wider social engagement.
Respondents desired to do good while making money, the report said.
When asked about 10 key forces driving global change, wealth creators who participated in the research saw two-thirds of these drivers as long-term opportunities rather than threats; only pandemics and war and terrorism were perceived as threats by majorities of respondents.
- Scientific and technology revolutions
- Communications revolution
- Changing energy sources
- Food sustainability
- Population growth
- Environment change
- Lack of long-term leadership
- War and terrorism
In fact, the research found that about 21% of wealth creators were proactively leveraging the opportunities they saw in the world through their businesses and investments. In contrast, only 5% were seeking to counter potential threats to the world from these forces through business, investment and charitable giving.
The report said wealthy clients juggle conflicting obligations. “When any individual makes these choices, there will be an inexorable trade-off between being good, being good enough and being right.”
In this context, it said, “responsible wealth management means capturing what matters most to our clients, distilling it and reflecting it back in each of the services we deliver.”