Although advisory and discretionary asset management services are more profitable to wealth managers, they cannot afford to ignore the needs of clients who self-direct. Globally over a quarter of HNW wealth is invested independently of wealth managers’ mandates. Furthermore, a large chunk of assets already brought to wealth managers sits within execution-only platforms. Technological and regulatory changes in the financial services industry have affected the drivers for investors to self-direct in recent years. Understanding these factors is crucial to ensure the long-term profitability of wealth managers’ business.
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Key Findings
– Globally execution-only mandates constitute 19.1% of total HNW assets held with wealth managers. Although clients in developing economies tend to prefer unadvised services, the US represents the biggest market opportunity in terms of self-invested assets.
– HNW clients under 35 years old and first-generation entrepreneurs are most likely to self-direct their investments.
– Price-sensitivity encourages HNW investors to look for alternatives to the services of wealth managers in mature economies, but in developing markets a pure preference to run simple portfolios independently is the key driver.
– Advances in digital technology are contributing to the growing interest in DIY investments, particularly in Asia Pacific.
– Traditional brokerage business models are being challenged by the growing number of platforms offering automated investment solutions (robo-advisors).
– The increasing popularity of exchange-traded funds (ETFs) and peer-to-peer (P2P) lending platforms has started to affect the business of wealth managers.
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Synopsis
This report draws on our 2015 Global Wealth Managers Survey to analyze the independent HNW investors’ landscape across the globe. It sizes the market for self-directed investments and examines the key drivers behind wealthy individuals’ decision to build their portfolios without professional advice. The competitive landscape and product environment are also analyzed. Specifically, the report:
– Estimates the value of HNW and mass affluent assets invested outside discretionary and advisory mandates
– Analyzes the demographics of DIY investors
– Compares drivers for self-directed investments between developed and emerged economies
– Examines client targeting strategies of brokerages and robo-advisors
– Identifies what investment products are preferred by self-directed HNW clients and how wealth managers can use them to expand their offerings
Reasons To Buy
– Discover how much HNW wealth is invested independently from wealth managers
– Learn why HNW investors choose to self-direct, and how their motivations differ from those of mass affluent individuals
– Gain an insight into best practice examples from competitors operating within the self-directed landscape
– Understand how the rise of robo-advisors and the growing popularity of ETFs and P2P lending affects the wider wealth management industry
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Companies Mentioned:
Barclays
Charles Stanley
Fidelity
Hargreaves Lansdown
Interactive Investor
TD Ameritrade
Merrill Edge
Charles Schwab
Scottrade
Fidelity
Bank of America Merrill Lynch
Betterment
Wealth front
Wells Fargo
UBS
National Australia Bank
Executive Summary:
Self-directed investors remain a lucrative target group for wealth managers
Key findings
Critical success factors
SIZING THE GLOBAL MARKET FOR SELF-DIRECTED INVESTMENT
Defining the self-directed investment market
Globally execution-only mandates constitute 19.1% of total HNW assets held with wealth managers
HNW clients in Central and Eastern Europe have the strongest inclination to use execution-only services
Among developed markets, execution-only platforms are popular particularly in France
Over a quarter of global HNW wealth is invested independently of wealth managers
Users of execution-only mandates are also likely to self-direct through third-party services
The HNW self-directed market is largest in the US and China
The US HNW self-directed market alone is worth $2.6tn
Demand for execution-only services will grow, but will be outstripped by advised services
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