Discretionary Asset Management: HNW Demand and Drivers

Monday 6 February 2017, Amsterdam

The company’s latest, now available on ASDReports, report analyzes the demand for discretionary asset management – as well as factors fueling interest in such services – of HNW investors in 17 countries covered by the keyplayer 2016 Global Wealth Managers Survey. Although 52% of millionaires’ investable assets are managed on a discretionary basis globally, the level of interest in such services varies significantly between markets.

Bartosz Golba, Acting Head of Wealth Management, states: “HNW individuals in Singapore, the UK, and the US have an average of more than 70% of their portfolios placed in discretionary mandates – the highest share across the globe. These are all developed markets, where the uptake of discretionary asset management is generally higher than in emerging economies.

“Such services are a perfect match for clients lacking the time and expertise to manage their investments, both major factors driving demand for discretionary mandates. However, trust plays an important role as well. Investors will be skeptical about giving up control over the investment decisions to advisors they do not know well and do not have a relationship with.”

According to Golba, established wealth managers will try to leverage their relationships with existing clients to increase mandates penetration: “Discretionary services offer higher profit margins than advisory propositions. In this way, growing mandates penetration is at the center of many providers’ strategies, one example being Citi Private Bank, particularly in the Asia-Pacific region. For players with large client books, moving assets to mandated services might prove an easier way to grow revenue than competing for new clients.”

The keyplayers research shows that discretionary portfolio managers will also experience competition from digital providers, which have traditionally been conceived as appealing mostly to self-directed investors.

Golba continues: “Wealth managers in developed markets have started to lean towards the view that digital players no longer compete only for execution-only business. Indeed, in Europe many providers dubbed ‘robo-advisors’ offer a discretionary investment management service. They have clear fee structures which appeal to price-sensitive clients, though the lack of a recognized brand remains their primary handicap.”