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HNWs ‘more resistant’ to one size fits all wealth solutions – report

Advisors could be left out in the cold as trust, technological change and intergenerational wealth transfer plays on the minds of HNW families, writes Arun Kakar

HNWs are becoming more suspicious of external advice from wealth managers and trusted advisers because they fear having a one-size fits all solution imposed on their unique needs – according to an authoritative report based on in-depth interviews with more than a dozen wealthy families.

The report, titled Family Fortunes, found that these families were ‘more resistant’ to advice from their wealth advisers because they are worried that ‘firms attempt to apply the same set of solutions to every family’, the authors from Global Partnership Family Offices (GPFO) and Sanlam UK.

While some families have strong relationships with their advisers and rely on their recommendations, others are less reliant, and use them more for single tasks such as trade execution. It found that trusted advisers were appreciated for their knowledge of complex issues such as tax, and that families welcomed fair advice grounded in ‘honesty, integrity and transparency’.

‘Service providers should be able to assess each stage of the family’s journey and offer tailored advice,’ the report noted. ‘It’s also important that families are aware of, and understand, any decisions advisers take on their behalf.’

As such each generation of a family might require their own set of advisors to deal with their ‘evolving requirements’. One of the possible issues that younger generations could raise is socially responsible investment (SRI) and impact investing, where it found that ‘most families’ are looking to incorporate SRI approaches into their strategies. Most families want their children to invest in responsible ways, but impact investing wasn’t viewed as a priority by every respondent: one family went as far as to condemn the category as ‘simply a way for large asset managers to sell products’.

‘The views expressed reflect the changing nature of the industry, especially when it comes to the transfer of wealth and how the next generation want their money to be invested,’ said Penny Lovell, CEO of Sanlam UK’s private office.

The report follows earlier research from Sanlam that found 5.1 million UK citizens aged 25-45 are expecting to receive at least £50,000 in fixed assets or money – a total transfer of £1.2 trillion over the next 30 years that will yield a new generation of client for advisors to contend with. This ‘great transfer’ provided the focal point for the latest report, in which the firm quizzed 15 global HNW families, as well as ‘many others’ responsible for making decisions with their assets including principles, next-generations and advisers.

The new report also found a ‘consensus’ concern around IT security, with all families expressing a commitment to heightened security. The ability of a family office to keep pace with technological progression was a ‘concern and common refrain’ too, with some families expressing discomfort when making large transactions using a smartphone or tablet.

Reaction to the pace of technological change was varied. The report found ‘some apprehension’ among families to the notion that human interaction could soon become a luxury due to technological change, but concerns arose that family offices would be paying higher fees as a result.

On the other hand, other respondents revealed that their family offices are now totally virtualised. Some even expressed frustration over the inability of financial services companies when dealing with their digital requests such as the provision of online transactions.

‘In a time where the level of inheritance is unprecedented it is crucial for families to consider how they can help support the successful passing down of wealth to future generations,’ says Michael Oliver, co-founder of GPFO. ‘Family offices are in a unique position – very often working with multiple members of the same family over a number of generations – and as such are well placed to help wealthy families navigate the increasingly complex and challenging economic and technological environment.’

One anonymous family quoted in the report wants their service providers to be ‘more Google and less Goldman Sachs’, which poses a difficult challenge: how do they facilitate both the transfer of wealth and the increasing complexity of its management? It’s a challenge that’s beginning to look more like an ultimatum.

Main photo credit @Flickr