HNW investors unprepared to meet financial goals says EY global survey

Wealth managers will need to adapt faster than ever amid unprecedented levels of volatility and global uncertainty that is changing the way people invest in uncertain times, according to the 2023 EY Global Wealth Research Report. 

The fourth edition of this survey, which recorded the views of more than 2,600 wealth management clients across 27 geographies, found (40%) of survey respondents think that managing their wealth has become more complex over the last two years, with more than half (57%) citing market volatility as a reason for their lack of financial preparedness.

This figure rises to 69% among baby boomer clients - those born between 1946 and 1964, who are more likely to have retired or be close to retirement.

Mike Lee, EY Global Wealth and Asset Management Sector Leader, said:"Given the ongoing market volatility, investors have a lot of questions right now and they are hungry for advice. Continued market stress is amplifying their defensive stance and appetite for both switching and adding to their portfolio.

"The role of the wealth manager is crucial right now and will remain in the spotlight as they evaluate their risk models, provide sound advice and take a proactive approach to the interwoven complexities that have evolved rapidly in the past few months."

According to the survey, over the past two years there has been a 30% decrease in the number of clients who indicate a key purposeful financial legacy goal of transitioning wealth to family and charity as a top priority.

Investors' three leading goals are now protecting wealth against losses and inflation (43%), strengthening investment returns (40%) and ensuring adequate income and financial security (32%).

Jan Bellens, EY Global Banking & Capital Markets Sector Leader, said: "The findings of the study are clear - investors are diversifying more so than ever, and it will come as no surprise that given recent global events, immediate access to funds poses both an opportunity and a risk.

"Investment has become more complex and wealth managers will need to manage the associated operational challenges - including the rise of digital assets and ESG funds, and how investors are being influenced by market trends and economic uncertainty."

Despite unrest in the market, the appetite to switch wealth management providers is high, especially for younger investors. Almost half of respondents (45%) plan to add a new provider, move money to another provider or switch altogether in the next three years.

Millennials - born between 1981 and 1996 are nearly three times (73%) as likely to move assets than Boomers (29%).

The appetite for passive versus active is reflected in the generational divide, with younger investors more likely to switch to active investment in the face of volatility; half of (50%) millennials increasing allocations to active investments compared to just 22% of boomers.

Similarly, millennials are three times more likely to use a digital assets provider or crypto wallet than their older generational counterparts (24% of millennials have an existing relationship).

The proportion of respondents working with FinTechs to manage their wealth is expected to double from 9% to 18% over the next three years - attracted by the sector's low charges, specialized digital experiences and low-friction switching.

That growth is expected to be even more dramatic in Europe (increasing from 11% of respondents to 23%), Asia-Pacific (14% to 26%) and the Middle East (8% to 41%).

The survey shows investors are hungry for advice and expertise from their advisor to interpret economic, market and political shocks. Millennials (66%) and those feeling least financially prepared (67%) are signaling the clearest appetite for more advice on investment services, and specific regions are exceeding the 48% global average: Middle East (63%), Latin America (59%) and Asia-Pacific (56%).

The survey also found that investors have acted in similar proportions in response to market volatility, moving to active investments and seeking safety with increased allocation toward savings/deposits.

Almost three-quarters (73%) of respondents changed investment behavior due to a decline in portfolio value, and more than a third (34%) moved assets into active investments. Conversely, 33% have taken a more conservative move toward savings and deposits.

The survey also found that more than half (53%) would seek additional independent financial advice, and 62% investors globally would review their financial plans in response to future volatility.