What do HNI investors expect from their Financial Advisors and Wealth Managers?

High Net-Worth Individuals - often referred to with the acronyms HNWIs or HNIs – have been a lucrative demographic for wealth managers, particularly in the last couple of decades. Typically, the term is used for individuals with liquid assets – cash or its equivalents – between 1 million to 5 million dollars⁽¹⁾. The size of such holdings translates into a wider scope of investment options and strategies, as well as more substantial commissions for financial advisors and wealth managers. The obvious benefits to wealth management professionals translate into more specific and prioritized services, but there’s a flip side to this relationship too. Quite understandably, HNIs have very specific expectations of their financial advisors as well.

The complexities of managing the wealth of individuals – and families – with such substantial holdings, extend much beyond the challenges faced by the average person; in terms of securing their current status, and making plans for the future. Managing the wealth of HNIs needs to take into account not just their assets, but also their lifestyle, portfolio-level investment optimization, asset protection, taxation concerns, the establishment of trusts, formalized succession plans, and much more.

Providing effective wealth management and financial advice, to such individuals, requires more experience and a higher level of knowledge, than that which is sufficient for the average investor. This is also the reason why HNIs tend to prefer to establish longstanding relationships, with their financial advisors. This is why gaining a holistic understanding of what HNIs expect from their wealth managers, is a critical business imperative; for wealth management firms.

"We are witnessing a trend among investors, which favours socially conscious and value-driven financial services."

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HNIs are often individuals with well-considered opinions and an evolved self-image. Increasingly, we are witnessing a trend among such investors, which favours socially conscious and value-driven financial services. Concurrently, HNIs are displaying a clear preference for wealth managers that proactively share the basis for their advice and insights. Such investors want their wealth managers to provide them with the latest technology-led communication and data management, as well as reflecting their priorities on environmental, social, and governance (ESG) issues, in addition to good returns on their investments.

And such preferences are not restricted to recent trends. A 2016 survey, conducted by a global wealth management firm headquartered in the US, found that 82% of HNIs selected their financial advisers based on their social responsibility credentials – with the figure going up over 90% for the wealthiest among such investors⁽²⁾. In contrast, the same survey discovered that only around 40% of the wealthiest respondents linked insights to their wealth manager’s credibility. While it’s no one’s claim that the quality of actual investment insights is insignificant, these results do authenticate the fact that HNIs rate ESG conscious investing very highly.

"Capgemini’s World Wealth Report 2020 found that 27% HNIs wanted to back sustainable products, and wanted to allocate an overall average of 41% of their investments to those businesses that had proactive ESG strategies."

Capgemini’s World Wealth Report 2020⁽³⁾ found that 27% HNIs wanted to back sustainable products, and wanted to allocate an overall average of 41% of their investments to those businesses that had proactive ESG strategies. Of those surveyed 39% prioritized higher returns, while 55% identified climate change as an area of focus, 54% were interested in ethical governance, and 52% showed concern about socially conscious business practices.

Wealth Managers must proactively reflect ESG concerns, to gain HNI clients

Traditionally, wealth management has had a single-minded focus: high returns. With the rise of a new generation of HNIs, many of whom have a tech background and are extremely active on social media, the wealth management industry now needs to take a broader view of their responsibilities, than the role they were accustomed to, in the past.

Partly, these re-jigged priorities reflect the fact that substantially more HNIs are now from a younger age group, than might have been the case in the past. From the huge success of several startups around the world, to entire investment classes – like cryptocurrency – that disproportionately attract Millennial and Gen Z investors, there are several factors driving the rise of a younger HNI. Naturally, such investors reflect the broader priorities of their generation. However, it would be incorrect to characterize this socially conscious focus as being restricted to Millennials and Gen Z.

A global consensus about the threat of climate change has been further escalated by the collective rethink that our world was forced into, because of the COVID-19 pandemic. Simply put, the new normal is being reflected by a crystallization of the idea that the world can be a better place, if we take responsibility – both individually and collectively. There is a quantifiable social capital associated with promoting these socially conscious priorities, visibly; and HNIs are particularly keen to be seen to be doing so. For wealth managers to advance their case, as the appropriate service providers to this demographic, they need to be just as visible in reflecting ESG concerns, as a matter of priority.

Final thoughts

We are living in rapidly changing times. The collective consciousness of the world is ready to take a leap into a more aware and responsible way of doing things. And as the old saying goes, "putting your money where your mouth is", has become more important for investors, than ever before. The self-image of HNIs is often that of a thought leader, and opinion maker. For financial advisors and wealth management firms to attract these clients in larger numbers, they need to be seen to be aligned with the evolving priorities of HNIs. As with nearly every service industry subset, wealth management too must deliver on both the tangible, as well as intangible, preferences of their clients.

The world has prompted wealth management advisors, specifically insurers and brokers, to look for unique ways to stand out and compete. While technology has been disruptive, it has also levelled the playing field, by opening new avenues for service differentiation. Read more on how financial advisors can unlock multifold value and differentiate themselves on