Ultra-Wealthy Measure Wealth Differently Than Many Advisors: Report

Chubb, a commercial insurer, and The Wharton School of the University of Pennsylvania put out a report this week that looks at differences in how wealth managers and ultra-wealthy individuals evaluate assets and coordinate risk management activities.

The study, which included a survey of 100 investors with a minimum of $30 million in wealth, family office members and key financial decision makers, showed that these differences are particularly apparent with tangible assets like property, art collections and other valuables.

The survey found that 87% of ultra-wealthy participants considered tangible assets part of their wealth, while only 53% of financial advisors saw these assets in the same way.

“In our sample, most UHNW respondents view their wealth holistically, meaning that they think of multiple factors, such as tangible non-financial assets, operating businesses assets, human capital and liquid financial assets, as representing a more complete picture of their family’s total wealth,” Christopher Geczy, the Wharton finance faculty member overseeing the research, said in a statement.

“Understandably, many wealth managers may focus largely or exclusively on the risks and returns of stocks, bonds, private equity and other financial investments, but the research shows that UHNW asset owners want their wealth managers to consider tangible assets to be a part of their investment plans.”

The research showed a 37% gap between ultra-wealthy investors who believe tangible assets should be included in their balance sheet and wealth advisors who coordinate with an insurance agent or broker to protect those assets.

Ninety-five percent of respondents with $50 million or more in wealth and 80% of those with $30 million or more said they would prioritize coverage and service over price.

According to the survey, the chief insurance priority for ultra-high-net-worth individuals is knowing that the insurance carrier has a strong balance sheet and is financially stable, followed by the carrier’s ability to handle complex situations.

The research also found that, modeled over a 40-year period, adequate liability insurance and property coverage might improve the risk-adjusted return on assets of total balance sheet portfolios that include a family’s business, property and possessions.

“Ultra-high-net-worth people face constantly changing and complex risks and are looking for guidance from those who understand the complexity of their wealth, such as advisors and insurers, to coordinate all assets and risks,” Frances O’Brien, division president of Chubb North America Personal Risk Services, said in the statement.