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Self-Directed Investors: Implications for Wealth Managers; Understanding how self-directed investment affects the wealth management industry.

Self-Directed Investors: Implications for Wealth Managers; Understanding how self-directed investment affects the wealth management industry.

  • March 2016
  • 50 pages
  • ID: 3692452
In this report:
THE MAJORITY OF ADVISORS FORECAST DEMAND FOR EXECUTION-ONLY SERVICES TO GROW OVER THE NEXT FEW YEARS, WITH ONLY ##% PREDICTING IT TO DECREASE.
IT HAS HISTORICALLY BEEN BELIEVED THAT HNW CLIENTS ARE NOT LIKELY TO BE HEAVY USERS OF SOCIAL MEDIA PLATFORMS; HOWEVER, ##% OF UK INVESTORS TAKING PART IN EQUITY CROWDFUNDING ARE CLASSIFIED EITHER AS PROFESSIONAL OR HNW, ACCORDING TO A STUDY BY NESTA.

Summary

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Brief

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 big 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 new years. Understanding these factors is important to ensure the long-term profitability of wealth managers' business.

Main highlights

- Globally execution-only mandates constitute 19.10 percent of global HNW assets held with wealth managers. Although clients in developing economies tend to prefer unadvised services, the U.S. 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 top driver.

- Advances in digital technology are contributing to the increasing interest in DIY investments, particularly in Asia Pacific.

- Traditional brokerage business models are being challenged by the increasing number of platforms offering automated investment solutions.

- The growing popularity of exchange-traded funds and peer-to-peer (P2P) lending platforms has started to affect the business of wealth managers.

Abstract

This industry report draws on our 2015 Global Wealth Managers Survey to examine the independent HNW investors' landscape across the world. It sizes the market for self-directed investments and examines the main drivers behind wealthy individuals' decision to build their portfolios without professional advice. The ambitious landscape and product environment are also analyzed. Specifically, the market research:

- Estimates the value of HNW and mass affluent assets invested outside discretionary and advisory mandates

- Examines the demographics of DIY investors

- Understand how the rise of robo-advisors and the increasing popularity of ETFs and P2P lending affects the wider wealth management industry

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