Capgemini is a global consulting firm headquartered in France that has released the World Wealth Report (in conjunction with Merrill Lynch) for the past 14 years.
In the most recent report,World Wealth Report 2010, they offer some interesting observations with regard to the post-crisis environment. In their view, investor psyche has changed significantly in the past three years. Since their insights run parallel to what we, at ClientWise, are seeing in the industry, I thought that I might share them verbatim:
1. Post-crisis, most high net worth clients have yet to regain their trust in the regulatory bodies and institutions that are meant to oversee markets and protect investor interests. Coupled with ongoing concerns around financial markets, this lack of confidence has long-term implications for investing behavior.
2. Shifts in asset allocation mirror investor caution. High net worth investors are favoring predictable forms of cash flow like those in fixed-income products, and are seeking protection against downside risk, and their search for returns takes place within the broader context of portfolio risks and goals.
3. High net worth investors have seized a more hands-on role in their finances. Above all, they want specialized and independent advice, transparency and simplicity, and effective portfolio and risk management, and are looking for wealth management provider relationships that can clearly demonstrate a more integrated approach to meeting their needs.
4. Emotional factors are a prominent feature of the high net worth psyche today, and wealth management firms and advisors must incorporate those emotional factors into stronger portfolio management and risk capabilities so as to properly support client goals and needs.
5. With billions of assets still in motion post-crisis, wealth management firms are embracing change, leveraging key tenets of behavioral finance to rebuild investor trust and confidence and drive further innovation into their offerings and service models.
Admittedly, many of these changes in investor psyche were happening before the financial crisis. However, post-meltdown they seem to have been exacerbated.
However, the learning for financial advisors is profound. Assuming that you agree with Capgemini's observations, the coaching question is: what are you doing differently now to meet your clients’ needs, communicate more effectively and restore their trust?
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