HNWIs ‘want transparent, socially-responsible investing, and more info more often’

High-net-worth individuals believe those who are looking after their wealth should be transparent about what they’re doing and why they’re doing it; that they should communicate more often with them, via email and other electronic means; and that they should take a socially responsible approach to the investments they choose for them, a new survey has found.

The survey, conducted by the London-based Scorpio Partnership in association with the NYSE-listed FactSet financial information and analytic software provider, sought to find out how some 1,022 HNWIs and ultra-HNWIs living in the US, UK, Switzerland and Singapore felt about their wealth managers. In particular, they were asked to say how they felt about the way their money is looked after, the way their wealth managers handle risk and are regulated, and the way these managers communicate with them.

Given that FactSet is a provider of financial information, the survey was particularly focused on the role information and the way it is imparted plays in the opinions of these HNWIs and UHNWIs.

The findings reveal “a clear call to action for wealth management firms” that comes not from regulators or product providers, “but from [wealth managers’] clients” themselves, says FactSet director of wealth management strategy Greg King, in a summary of the survey’s key points. 

Socially-responsible investing

One of the most surprising, and somewhat contradicting, findings – given that, as the survey revealed, HNWIs are, as a group, “highly risk-averse” – is that these wealthy investors are also keen, as King points out, to “fuse socially-responsible investment strategies into their portfolios”.

This is particularly the case if they are in the so-called Millennial age group, which is under 35, King observes.

“For HNW Millennials, responsibility is also strongly associated with a socially responsible approach to investing, [with] with a third of respondents under 35 [saying] they want evidence that their wealth managers are screening investments based on environmental, social and governance (ESG) factors,” King says.

“This request was similar in the 35 to 54 age group, suggesting that a shift in investor expectations has already occurred.”

Asked how they expected their allocations to socially responsible investment would be likely to change over the next five years, 45% of the under-35-year-olds said they foresaw it increasing “a lot” and 45% “a little”; 26% of those in the 35-to-54 group said “a lot” and 46% “a little”; and in the 55-plus age group, the responses were 10% (“a lot”) and 28% (“a little”).

Just 1% of the respondents aged 35 and over said they thought their allocations to SRI would decrease between now and 2021.

HNWIs and UHNWs believe the “culture” of the wealth management firms they use should “be about generating an efficient, vibrant eco-system of information”, with wealth managers delivering “transparency, clear communications and quality insight” and demonstrating “the brand value of responsibility, not just by giving a full line of sight into the activities of their business, but by allowing clients to see the underlying social and ethical credentials of their own investment portfolios,” King summarises in an introduction to the survey’s findings, entitled The Culture Challenge: HNWI’s Vision for the Wealth Management Industry in the Information Age.

Other key findings of the FactSet/Scorpio Partnership survey:

*  The HNW and UHNW investors surveyed believe that financial regulators should be responsible for seeing to it that “their wealth managers have the corporate infrastructure to expedite transparency”. Of those surveyed, 86% said the industry watchdog “should prioritise implementing minimum standards of quality on investment technologies”

*  Wealthy investors believe in a “multi-channel approach” to being kept informed by their wealth manager, and “have become adept at leveraging a full toolkit of traditional and digital media to obtain insights”. Online forms of interaction, though, “tip the balance when it comes to client engagement” these days, with “email the most popular”

*  The “Generation Xers”, those aged 35 to 54, “echo many of the demands of the younger generation [the Millennials]…in calling for more advanced technologies, greater social awareness and deeper engagement with their wealth managers”

*  HNWIs and UHNWIs “want systems and people in place who can facilitate effective information flow. They want their wealth managers to deliver technology-augmented communications, quality investment insight and a dynamic approach to managing personal data. Above all, they require a deep understanding of how their wealth manager and portfolio matches their social values”

To read and download the report, click here.

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