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

Date: 2016-03

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.

Key Findings
–聽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.

–聽HNW clients under 35 years old and first-generation entrepreneurs are most likely to self-direct their investments.

–聽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.

–聽Advances in digital technology are contributing to the growing interest in DIY investments, particularly in Asia Pacific.

–聽Traditional brokerage business models are being challenged by the growing number of platforms offering automated investment solutions (robo-advisors).

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

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:

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

–聽Analyzes the demographics of DIY investors

–聽Compares drivers for self-directed investments between developed and emerged economies

–聽Examines client targeting strategies of brokerages and robo-advisors

–聽Identifies what investment products are preferred by self-directed HNW clients and how wealth managers can use them to expand their offerings

–聽Discover how much HNW wealth is invested independently from wealth managers

–聽Learn why HNW investors choose to self-direct, and how their motivations differ from those of mass affluent individuals

–聽Gain an insight into best practice examples from competitors operating within the self-directed landscape

–聽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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