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HNW Client Satisfaction With Advisors Is Subdued Despite Stellar Returns: Capgemini

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Client satisfaction is the perennial concern of wealth managers, and a new report suggests they have some work to do.

Capgemini’s 2018 world wealth report found that global satisfaction levels for wealth managers among high-net-worth individuals stood in the low 60% range in the first quarter. Even with a year-over-year increase in satisfaction, this was still below a “passing grade” of 70%.

Here’s the kicker: Over the past two years, investors enjoyed robust investment returns. Capgemini said this suggested that investment returns by themselves are insufficient to sustain a wealth management business.

The report said the wealth of individuals with $1 million or more of investable assets surpassed the $70 trillion threshold, with 1.6 million people joining their ranks globally. High-net-worth wealth grew by 10.6% year on year, a sixth consecutive year of gains, and will surpass $100 trillion by 2025, it said.

Capgemini noted that several concerns may be driving global investors’ subdued satisfaction levels: overall wealth management fee levels, growing need for personalized service and the desire for broader value delivery across investment and non-investment areas.

In order to improve satisfaction, it said, wealth managers must invigorate their personal connection with high-net-worth clients. Doing this will reduce their reliance on investment returns for retaining clientele.

In the first quarter, just 55.5% of high-net-worth individuals globally said they had connected strongly with their wealth managers.

Other Findings

Capgemini reported that wealth gains were global. North America and Asia/Pacific accounted for 75% of the increase in the global high-net-worth population, an additional 1.2 million individuals, and 69% of the rise in wealth, $4.6 trillion. Europe’s population grew by 7.3% and its wealth by 7.8%.

Investments in equities, cash and real estate drove increased returns. In the first quarter, equities were the most significant asset class, at 30.9% of high-net-worth financial wealth; cash and cash equivalents 27.2%; and real estate increased 16.8%.

According to the report, cryptocurrencies appeared to create a dilemma for wealth management firms. Whereas 56% of high-net-worth individuals globally expressed at least some interest in buying or holding digital currencies, only 35% reported that they had gotten relevant information from their wealth managers.

Seven in 10 younger investors in the study placed importance on receiving information about cryptocurrencies from their wealth management firms, compared with just 13% of those 60 and older. Capgemini said that despite regulatory uncertainty and caution on their part, this demand was likely to force firms at least to develop and offer a point of view in the months ahead.

With what the report called “BigTechs” amassing at the gates of wealth management firms, Capgemini said the question was when, not if, collaboration with them would begin. Seventy-five percent of all firms in the study reported that they would invest in intelligent automation and artificial intelligence, among other innovative technologies, over the next 24 months to prepare for BigTech’s entry.

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