Asset managers are increasingly working in isolation from high-net-worth investors, industry participants believe
June 30th, 2008 Both distributors and asset managers say that the asset management community still operates at a distance from the investors who buy their products, according to High-net-worth investors and asset managers: Bridging the gap, an Economist Intelligence Unit white paper sponsored by Citi's Global Transaction Services. The report was based on a survey of 168 investment executives throughout the world as well as a multiple follow-up interviews with industry participants in the US and Europe.
"The less information an asset manager has, the more difficult it is to tailor products," said Dan Armstrong, Senior Editor at the Economist Intelligence Unit and the editor of the report. "Asset managers may not be dealing directly with investors, but investors still hold the key to their livelihood."
"We are very pleased to be the sponsor of this EIU study, which has cast a revealing light on how asset managers, high-net-worth investors and distributors are interacting together in today's financial ecosystem." said Neeraj Sahai, Global Head of Securities and Fund Services at Citi's Global Transaction Services. "The results are compelling, especially for asset managers as they navigate the complexity of today's evolving marketplace," he added.
Key findings of the report include the following:
Asset managers tend to work in isolation from investors. Majorities of both asset managers and distributors agree: In general, asset managers are too detached from high-net-worth investors. In fact, distributors are evenly split on whether asset managers are capable of manufacturing suitable products for their clients.
High net worth investors think in terms of absolute rather than relative returns. Asset managers tend to understand this more than distributors, but a majority of both groups complain that many investors do not compare their returns to market benchmarks. Research also shows little understanding on the part of investors of the concept of risk-adjusted returns.
Wealthy investors are willing to pay higher fees for superior performance. Asset managers agree especially strongly on this point: Fees are tolerated for outperforming investments. The exception is in the Asia-Pacific region, where investors demand superior performance and also strongly resist fees, according to survey participants.
Synergies between investing for institutions and wealthy individuals are increasing. This is particularly true in terms of product offerings - many can be sold simultaneously to both groups. Nevertheless, individuals still require a different approach. They tend to demand more support and consultation, especially in a volatile investment climate.
Asset managers need to develop a better support network. Asset managers have already turned to investment consultants to help them strengthen relationships with institutional clients. There may be a similar role for third parties to help build tighter links with relationship managers at distributors.
High-net-worth investors and asset managers: Bridging the gap is available free to download at http://www.eiu.com/high-net-worth
About the survey
The research for this report is based on an online survey, conducted in May of 2008, of 168 executives at asset management or distribution firms serving the high-net-worth investor market. A range of sub-sectors was represented, including mutual funds, custodians, broker-dealers, diversified and retail banks, specialised wealth management firms and hedge funds. Respondents represented companies with average global assets of US$66bn.
About the Economist Intelligence Unit
The Economist Intelligence Unit is the business information arm of The Economist Group, publisher of The Economist. Through our global network of about 650 analysts, we continuously assess and forecast political, economic and business conditions in 200 countries. As the world's leading provider of country intelligence, we help executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies.