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Portfolio > Asset Managers

Vehicles tops reasons for appeal of wealthy investors

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Most asset managers rank providers to high net worth investors as an attractive opportunity due to the vehicles investors use and their sophistication, according to a new report.

Cerulli Associates discloses this finding in the October 2013 issue of the “Cerulli Edge: U.S. Asset Management Edition.” The report surveys bank trust officers and their high net worth clients, wholesalers targeting high net worth advisors and young investors’ use of direct providers and financial advisors.

The research reveals that 53 percent of asset managers rank “vehicles used” as their top reason for working with high net worth investors. Also flagged by significant percentages of assets managers as reasons for which the HNW market is more desirable are:

  • Sophistication — 47 percent;
  • Customization — 41 percent;
  • Holding period — 39 percent;
  • Revenue-sharing — 39 percent;
  • Length of sales cycle — 39 percent;
  • Pricing flexibility — 38 percent; and
  • Sales resources — 28 percent.

“These are theoretically more experienced and knowledgeable investors, requiring asset managers to approach them with a more intricate product set,” the report states. “In addition, the sophistication of these investors should mean more rational decisions in times of poor performance and market turmoil.

“However, there are unique challenges to working with this population,” the report adds. “Because these are highly sought-after clients, they understand their power and can be more fickle about their relationships.”

The report indicates that, compared with their industry peers, a higher proportion of high net worth advisors use:

  • Individual securities — 22.3 percent vs. 17.6 percent;
  • Separate accounts — 11.5 percent vs. 7.6 percent;
  • Individual fixed income securities — 13.8 percent vs. 10.2 percent; and
  • Hedge funds or funds of hedge funds — 2.8 percent vs. 1.0 percent.

However, HNW advisors have a smaller adoption rate for the other vehicles. Among them:

  • Variable annuities — 2.4 percent vs. 6.1 percent;
  • Equity mutual funds — 13.7 percent vs. 19.7 percent;
  • Fixed income mutual funds — 9.1 percent vs. 11.7 percent;
  • Fixed annuities — 0.6 percent vs. 1.4 percent); and
  • Balanced/allocation mutual funds — 3.3 percent vs. 4.6 percent;


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