The future of the wealth industry is
centred on a crop of highly ambitious clients that are not as aware
as they should be about wealth management services on offer. How do
private banks gain access to these wealthy individuals and what are
their wealth needs? PBI looks at the latest research
Wealth managers need to provide a clearer idea of the services they
offer to overcome a “perception barrier” among prospective clients.
Seb Dovey, managing partner at wealth consultancy Scorpio
Partnership, said many clients were confused about what private
wealth advisers could do for them and that this lack of clarity was
holding back client acquisition.
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“For example, there are those who probably have enough money to go
to a private bank like Coutts, but have a perception that it’s
aimed at wealthier people,” he said.
“They worry that they might get laughed at if they try to open an
account, when often they would be eligible. If you were to take
that as a starting point, you see it’s a very confusing space and
there’s a problem for these individuals in establishing whether
private banking services are relevant to them.”
Dovey was speaking to PBI after the release of Scorpio’s
Futurewealth report, in association with Standard Chartered Private
Bank. Scorpio looked at the behavioural traits of a group of
clients it has identified as potential new clients for private
banks.
Last year, Standard Chartered said it was actively reducing the
age-profile of its target customers, and the paper underlines its
efforts in this area.
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By GlobalData“Without being too blunt, we want our future clients to think of us
first because we recognise that they are our future too,” said
Peter Flavel, Standard Chartered Private Bank’s global head. “We
want to help our clients to satisfy their future wealth ambitions
more quickly and we want to be their partner of
choice.”
Providing valuable insight
The research provides insight into the mindset of clients that
would in the future become highly desirable private banking
clients.
“It’s about what the wealthy need next: and it’s not just about
banking but any aspect of their lives,” said Dovey. “It’s about
trying to get in touch with the customer, and from Scorpio’s
perspective we’re lucky, because we set our stall out to understand
the client and we have done that for long enough to talk to a
specific set of non-clients that have real value to the
industry.”
The research was based on results from 1,414 individuals, with an
average wealth of $2 million, and was carried out in May and June
2009.
Dovey said many of those surveyed were what the industry would term
“income” clients – customers who have a high level of recurring
income, rather than a particularly large level of capital.
Eighty-three percent of those surveyed listed their primary income
was from employment.
“If you look at most private banks, the better clients are actually
those that have steady incomes,” said Dovey.
Optimistic about the future
The main findings were that 78 percent of the respondents were
optimistic about the future and that their wealth would grow in
2010. Confidence levels were particularly high in emerging markets,
with 84 percent of the future wealthy in Asia and Central &
Eastern Europe expecting to make money in the next 12 months.
Forty-one percent also claimed to have made money through the
financial crisis and 25 percent said their wealth had stayed the
same, though how they achieved this is not explained.
The prospective private banking clients were also asked what level
of wealth they thought they needed to achieve their long-term
ambitions and the timescale they had set to achieve it.
On average, clients wanted to move from the average level of $2
million to $8 million, with over half expecting to achieve that
within a 10-year time frame. The youngest were the most ambitious,
with wealth targets of around five times their current wealth
level. For those between 49-59 years old, the target falls to 2.5
times their current wealth.
The research also looked into a range of binary questions to
establish the individuals’ attitudes to wealth. It identified four
categories of wealthy individuals:
• Quietly confident (42 percent of respondents);
• Family activists (27 percent);
• Headliners (21 percent); and
• Life-surfers (10 percent).
The quietly confident, according to the research, are those that
are innovators with a desire to change business for the better.
Two-thirds have listed investments and they have little interest in
status purchases, many giving large sums to charity.
Family activists are more likely to be female, and their life goals
are to secure a future for their family and be remembered as a good
person.
Headliners are more likely to be make business owners that put a
lot of energy into their money at the expense of friends, family
and fun, according the report. They are focused on financial
security and are more likely to promote their status through luxury
purchases.
Life surfers are generally employees that tend to be less ambitious
and more fun loving. Money is important to them, the report says,
as it provides them with financial security and the ability to
pursue leisure pursuits and entertainment.
“It’s important to understand the clients’ needs for creating their
wealth, their ambitions in their life linked to wealth and when you
get to the behaviour of clients it becomes obvious the financial
institutions are not the first place they turn to,” said
Dovey.
“There’s an assumption bias in the industry that it is properly
positioned and that everyone needs a private bank, but from the
client side, and particularly the profile we’re looking at, that’s
not the case.”
