Investors in the High-Net-Worth and Ultra-High-Net-Worth Marketplace

Transcription

1 C e r u l l i a s s o c i a t e s Cerulli Special Quantitative Report Cerulli Special Quantitative Update This special report, developed in partnership with Phoenix Marketing International, examines behaviors, goals, product usage, provider preferences, investment allocations, and geographic location of high-net-worth investors (HNW) with $10 million or more in investable assets. Each topic is analyzed according to four investor segmentation characteristics: advice orientation; geographic region; source of wealth; and channel through which they invest. This report is a complement to Cerulli s annual coverage of the HNW marketplace that addresses asset managers and providers targeting these investors. With this report, firms are able to identify important business development strategies for succeeding in this highly competitive marketplace. Release: March 2011 Questions this Report Answers: How large is the HNW investor population and how are they segmented by financial and non-financial assets, debt level, age, and geographical location? What are HNW investors greatest concerns and most important goals? Who is the ideal HNW client? Which channels are HNW investors using? About Phoenix Marketing International How many providers, on average, are HNW investors using? What products are HNW investors using? What provider qualities and services are most important to HNW investors? What geographic areas are most attractive for targeting the HNW? Data for this report comes from Phoenix s ongoing survey of affluent households (the largest of its kind in circulation today). Through this survey, Phoenix has compiled one of the largest databases of individuals with greater than $10 million in investable assets. Key findings: Seattle, Dallas, Houston, Atlanta, and Washington DC present expansion opportunities for HNW providers. HNW investors indicate a top reason they left their provider was for better product offerings at a new provider. HNW Investors younger than age 40 have a greater level of investable assets on average than their older counterparts. Wirehouses command the majority of HNW provider marketshare. A full 30% of HNW investors use a managed account solution. Individual securities account for the largest portion of HNW advisor assets at 36%. Passive products have exploded in popularity among HNW investors. Sample Exhibit: Primary Reason for Beginning Relationship with Primary Provider, Exhibit % 18.6% 15% 10% 5% 0% Quality of service Reputation 12.3% Referral from a trusted source 9.6% 9.6% Convenient locations Relationship with someone at the firm Sources: Cerulli Associates, Phoenix Marketing International 8.2% 8.2% Strong investment performance Attractiveness of range of product and service offering 7.4% 7.1% 6.0% 5.5% 5.2% Positive previous experience Competitive fees Followed my advisor from aprevious institution Quality of relationship staff 2.5% Someone else chose for me Exclusive data in this report: Geographic analysis Product mix Fee structure Advice orientation Satisfaction metrics Account consolidation preferences Preferred provider characteristics Price: $10,000 - To order contact: Marketing & Business Development CAmarketing@cerulli.com or order online: Fax form on page 3. Attached: Table of contents Exhibit list Sample pages User examples Report Sections: (128 Exhibits) Market Sizing Profiles Services Products Business Development Cerulli Associates 699 Boylston Street Boston MA Tel: Maxwell Road Singapore Tel: Betterton Street London WC2H 9BP

2 C e r u l l i a s s o c i a t e s Cerulli Special Quantitative Report Cerulli Special Quantitative Update USER EXAMPLES Release: March 2011 The following are examples of how this report can be applied to business planning and strategic decision-making: User Example #1: A regional trust company is working on an expansion plan. In addition to exploring ways it can grow its share of wealth with current clients, it would like to explore expansion beyond its current footprint. This report provides answers to the following questions: Which cities and areas of the U.S. are growing fastest in terms of their HNW population? Which provider services do HNW investors value most? To what extent are HNW investors placing all or the majority of their assets with one provider? User Example #2: An asset management firm with a small but successful private client business would like to better understand the competitive landscape and how and why HNW investors choose providers and products. This report answers the following questions: Which channel has the majority of HNW investor marketshare? Why do HNW investors choose the providers they work with? Why do HNW investors change their providers? Which products are experiencing the greatest growth among the HNW? User Example #3: A private client group at a large wirehouse firm conducts proprietary surveys of its own investor base. These surveys address their HNW investors by measuring their satisfaction, preferences, and behaviors. However, the management team would like to compare these results to an objective data set to ensure that their observations are sound and can be used for strategic decision-making. This report answers the following questions: To what extent do HNW investors trust their financial services providers? What are HNW investors greatest concerns? What is the advice orientation of most HNW investors? User Example #4: A multi-family office recognizes that the competition has become much stiffer in the HNW marketplace. No longer does it have the lock on some of its longest-standing client relationships. It seeks turnkey market research on HNW investors that will provide insight to develop strategies for growth. This report answers the following questions: What is the product mix of HNW investors and how does it vary by advice orientation and provider channel? How important is client service and support to HNW investors? What types of services to HNW value most? Cerulli Associates 699 Boylston Street Boston MA Tel: Maxwell Road Singapore Tel: Betterton Street London WC2H 9BP

3 C e r u l l i a s s o c i a t e s Cerulli Special Quantitative Report Cerulli Special Quantitative Update PURCHASE DETAILS Release: March 2011 To purchase this report, fill out the form below and fax to or visit our website at Fax Back Form: k~ãéw cáêãw ^ÇÇêÉëëW müçåéw bã~áäw `áíó pí~íé wáé qáíäé Purchase includes: Hardcopy NEW: Softcopy Online access (unlimited per firm) Exhibits in Excel format Analyst support Special Feature: To view thumbnails of the contents of this report, please visit our website at Go to Order/Info and click on view next to the report title. Page 72 Page 89 Page 166 Price: $10,000 - To order contact: Marketing & Business Development CAmarketing@cerulli.com or order online: Attached: Table of contents Exhibit list Sample pages User examples Cerulli Associates 699 Boylston Street Boston MA Tel: Maxwell Road Singapore Tel: Betterton Street London WC2H 9BP

4 Table of Contents Index of Exhibits Key Themes and Prognosis What is the biggest challenge in serving HNW households? For a firm looking to expand its geographic footprint, which areas of the country offer opportunity? What are HNW investors primary goals? Who is the ideal HNW client? Which products do HNW investors use most often? What matters most to HNW clients in today s market? Chapter 1: Market Sizing Number of HNW Households and Location of their Assets and Wealth Sizing the Addressable HNW Market Geographic Distribution of HNW Households Chapter 2: Profiles Understanding HNW Households' Attributes and Behaviors Advice Orientation Goals and Concerns Chapter 3: Services Serving HNW Clients Contact Levels Fees Investment Management Chapter 4: Products Ownership of Products and Amounts Invested Mutual Funds ETFs Alternatives Chapter 5: Business Development Acquiring and Retaining HNW Relationships Reasons for Beginning Relationships Reasons for Satisfaction Reasons for Ending Relationships TABLE OF CONTENTS

5 Table of Contents Case Studies GenSpring Pitcairn Family Office Eaton Vance Investment Counsel Spruce Private Investors LLC Fortigent Methodology Index of Companies TABLE OF CONTENTS 3

6 Index of Exhibits Chapter 1: Market Sizing Case Study: GenSpring GenSpring Discretionary and Nondiscretionary Assets, September GenSpring Fee Schedule, September GenSpring's In-House Pooled Investment Vehicle Funds, September Exhibit Change in Aggregate Net Worth, E Exhibit Household Financial Assets by Type of Asset and Investable Asset Range, 2010E Exhibit Household Non-Financial Assets by Type of Asset and Investable Asset Tier, 2010E Exhibit Household Debt by Type of Debt and Investable Asset Range, 2010E Exhibit High-Net-Worth Households' Financial Assets by Type of Asset and Age Range, 2010E Exhibit High-Net-Worth Households' Non-Financial Assets by Type of Asset and Age Range, 2010E Exhibit High-Net-Worth Households' Debt by Type of Debt and Age Range, 2010E Exhibit Part 1. Number of High-Income Households by Region/State: West and Northeast, Exhibit Part 2. Number of High-Income Households by Region/State: West and Northeast, Exhibit Part 1. Number of High-Income Households by Region/State: South and Midwest, Exhibit Part 2. Number of High-Income Households by Region/State: South and Midwest, Exhibit Fastest Growing Cities with at Least 10,000 High-Income Households, Exhibit Number of High-Income Households in California by City, Exhibit Number of High-Income Households in Texas by City, Exhibit Number of High-Income Households in Washington by City, Exhibit Number of High-Income Households in New York and New Jersey by City, Exhibit Number of High-Income Households in Pennsylvania by City, Exhibit Number of High-Income Households in Massachusetts and Connecticut by City, Exhibit Number of High-Income Households in North Carolina by City, Exhibit Number of High-Income Households in Georgia by City, Exhibit Number of High-Income Households in Florida by City, Exhibit Part 1. Number of High-Income Households in Maryland, Washington D.C., and Virginia by City, Exhibit Part 2. Number of High-Income Households in Maryland, Washington D.C., and Virginia by City, Exhibit Part 1. Number of High-Income Households in Illinois, Ohio and Michigan by City, Exhibit Part 2. Number of High-Income Households in Illinois, Ohio and Michigan by City, Chapter 2: Profiles Exhibit Channel Descriptions, Exhibit Advice Orientation Descriptions, Exhibit Life Stage Descriptions, INDEX OF EXHIBITS

7 Index of Exhibits Exhibit Primary Provider Channel by Advice Orientation, Exhibit Part 1. Primary Provider Channel Databank, Exhibit Part 2. Primary Provider Channel Databank, Exhibit Advice Orientation by Primary Provider, Exhibit Advice Orientation Databank, Exhibit Life Stage by Advice Orientation, Exhibit Life Stage Databank, Exhibit Households' Trust of Financial Firms by Advice Orientation, Exhibit Part 1. Households' Trust of Financial Firms Databank, Exhibit Part 2. Households' Trust of Financial Firms Databank, Exhibit Average Number of Financial Advisors Used by Advice Orientation, Exhibit Part 1. Average Number of Financial Advisors Used Databank, Exhibit Part 2. Average Number of Financial Advisors Used Databank, Exhibit Percentage of Assets with Primary Provider by Advice Orientation, Exhibit Percentage of Assets with Primary Provider Databank, Exhibit Greatest Personal Concern Affecting Household by Advice Orientation, Exhibit Part 1. Greatest Personal Concern Affecting Household Databank, Exhibit Part 2. Greatest Personal Concern Affecting Household Databank, Exhibit Part 3. Greatest Personal Concern Affecting Household Databank, Exhibit Greatest Economic Concern Affecting Household by Advice Orientation, Exhibit Part 1. Greatest Economic Concern Affecting Household Databank, Exhibit Part 2. Greatest Economic Concern Affecting Household Databank, Exhibit Household's Most Important Financial Goal by Census Regions, Exhibit Part 1. Household's Most Important Financial Goal Databank, Exhibit Part 2. Household's Most Important Financial Goal Databank, Exhibit Household Risk Level by Advice Orientation, Exhibit Household Risk Level Databank, Chapter 3: Services Case Study: Eaton Vance Investment Counsel Eaton Vance Discretionary and Nondiscretionary Assets, January Eaton Vance Investment Counsel's In-House Funds, January Exhibit Services Used with Primary Advisor by Source of Wealth, Exhibit Part 1. Services Used with Primary Advisor Databank, Exhibit Part 2. Services Used with Primary Advisor Databank, INDEX OF EXHIBITS 5

8 Index of Exhibits Exhibit Part 3. Services Used with Primary Advisor Databank, Exhibit Frequency of Primary Provider Contact by Advice Orientation, Exhibit Part 1. Frequency of Primary Provider Contact Databank, Exhibit Part 2. Frequency of Primary Provider Contact Databank, Exhibit Preferred Amount of Contact, Exhibit Part 1. Preferred Amount of Contact by Current Frequency of Contact, Exhibit Part 2. Preferred Amount of Contact by Current Frequency of Contact, Exhibit Advisor Time Allocation by Channel, Exhibit Approach for Unprofitable Clients, Exhibit Estimated Revenue Opportunity by Client Age, 2009E Exhibit Importance of Written Financial Plan, Exhibit Factors in Choosing an Advisor by Primary Provider, Exhibit Part 1. Factors in Choosing an Advisor Databank, Exhibit Part 2. Factors in Choosing an Advisor Databank, Exhibit Part 3. Factors in Choosing an Advisor Databank, Exhibit Average HNW Provider Fee Schedule, Exhibit HNW Providers That Charge Retainer Fees, Exhibit Investor-Reported Fee Structure by Primary Provider, Exhibit Investor-Reported Fee Structure Databank, Exhibit Clients' Preferred Fee Structure by Primary Provider, Exhibit Clients' Preferred Fee Structure Databank, Exhibit Perceived Value vs. Expense by Investor-Reported Fee Structure, Exhibit Acceptable Annualized Rate of Return in the Next Five Years by Advice Orientation, Exhibit Acceptable Annualized Rate of Return in the Next Five Years Databank, Exhibit Parties Judged Qualified to Make Investment Decisions by Source of Wealth, Exhibit Part 1. Parties Judged Qualified to Make Investment Decisions Databank, Exhibit Part 2. Parties Judged Qualified to Make Investment Decisions Databank, Exhibit Part 3. Parties Judged Qualified to Make Investment Decisions Databank, Exhibit Frequency Households Verify Investment Information by Advice Orientation, Exhibit Frequency Households Verify Investment Information Databank, Exhibit Value of Investment Updates, Chapter 4: Products Case Study: Spruce Private Investors LLC Spruce Private Investors Discretionary and Nondiscretionary Assets, January INDEX OF EXHIBITS

9 Index of Exhibits Spruce Private Investors In-House Funds, January Exhibit Level of Discretion and Advice by Source of Wealth, Exhibit Level of Discretion and Advice Databank, Exhibit Desired Account Features by Source of Wealth, Exhibit Part 1. Desired Account Features Databank, Exhibit Part 2. Desired Account Features Databank, Exhibit Percent Invested in Equities by Source of Wealth, Exhibit Percent Invested in Equities Databank, Exhibit Have Target Allocation by Advice Orientation, Exhibit Have Target Allocation Databank, Exhibit HNW Advisors: Product Allocation by Channel, Exhibit Mutual Fund Ownership by Type of Mutual Fund by Primary Provider, Exhibit Part 1. Mutual Fund Ownership by Type of Mutual Fund Databank Exhibit Part 2. Mutual Fund Ownership by Type of Mutual Fund Databank Exhibit ETF Ownership by Primary Provider, Exhibit ETF Ownership Databank, Exhibit ETF Balance by Primary Provider, Exhibit ETF Balance Databank, Exhibit Reasons Household Purchased ETF by Primary Provider, Exhibit Part 1. Reasons Household Purchased ETF Databank, Exhibit Part 2. Reasons Household Purchased ETF Databank, Exhibit Percent of Households Receiving Discounts on Managed Accounts by Primary Provider, Exhibit Percent of Households Receiving Discounts on Managed Accounts Databank, Exhibit Hedge Fund Ownership by Primary Provider, Exhibit Hedge Fund Ownership Databank, Exhibit Hedge Fund Balances by Primary Provider, Exhibit Hedge Fund Balances Databank, Exhibit Fund-of-Hedge-Fund Ownership by Primary Provider, Exhibit Fund-of-Hedge-Fund Ownership Databank, Exhibit Fund-of-Hedge-Fund Balances by Primary Provider, Exhibit Fund-of-Hedge-Fund Balances Databank, Exhibit Structured Product Ownership by Primary Provider, Exhibit Structured Product Ownership Databank, Exhibit Structured Product Balances by Primary Provider, Exhibit Structured Product Balances Databank, INDEX OF EXHIBITS 7

10 Index of Exhibits Exhibit Other Investments Ownership, Exhibit Ownership of Annuity Products by Primary Provider, Exhibit Ownership of Annuity Products Databank, Exhibit Minor and Education Account Ownership by Source of Wealth, Exhibit Minor and Education Account Ownership Databank, Chapter 5: Business Development Case Study: Fortigent Fortigent's Discretionary and Nondiscretionary Assets, September Fortigent's In-House Funds, September Exhibit Primary Reason for Beginning Relationship with Primary Provider, Exhibit Factors in Choosing an Advisor, Exhibit Level of Satisfaction with Primary Provider by Primary Provider, Exhibit Level of Satisfaction with Primary Provider Databank, Exhibit Reason for Satisfaction with Primary Provider, Exhibit Reason for Satisfaction with Primary Advisor, Exhibit Willingness to Recommend Primary Provider by Primary Provider, Exhibit Willingness to Recommend Primary Provider Databank, Exhibit Number of Financial Advisors Used, 2008 vs Exhibit Length of Primary Advisor Relationship, Exhibit Consolidation Preference by Primary Provider, Exhibit Consolidation Preference Databank, Exhibit Perceived Value vs. Expense by Primary Provider, Exhibit Perceived Value vs. Expense Databank, Exhibit Reason for Low Satisfaction with Primary Provider, Exhibit Reason for Low Satisfaction with Primary Advisor, Exhibit Plan to Switch Providers by Advice Orientation, Exhibit Plan to Switch Providers Databank, Exhibit Percent of Households That Changed Primary Provider in Past 12 Months, Exhibit Percent of Households That Changed Primary Provider in Past 12 Months Databank, Exhibit Reason for Leaving Previous Provider, INDEX OF EXHIBITS

11 SAMPLE SECTION from Cerulli Special Quantitative Update: Investors in the High-Net-Worth and Ultra-High-Net-Worth Marketplace 2011

12 EXHIBIT 1.10 FASTEST GROWING CITIES WITH AT LEAST 10,000 HIGH-INCOME HOUSEHOLDS, 2009 Sources: Cerulli Associates, American Community Survey, U.S. Census Rank City Number of High-Income Households ( $200K) Total Households Population Growth Density of High-Income Households ( $200K) Married Households as % of High-Income Households 1 Raleigh-Cary, NC 20, , % 5.0% 90.4% 2 Las Vegas-Paradise, NV 23, , % 3.4% 73.4% 3 Austin-Round Rock, TX 30, , % 5.0% 81.0% 4 Phoenix-Mesa-Scottsdale, AZ 58,535 1,463, % 4.0% 80.4% 5 Charlotte-Gastonia-Concord, NC-SC 31, , % 4.7% 84.8% 6 Atlanta-Sandy Springs-Marietta, GA 97,676 1,878, % 5.2% 81.6% 7 Riverside-San Bernardino-Ontario, CA 44,548 1,237, % 3.6% 79.2% 8 Orlando-Kissimmee, FL 24, , % 3.3% 84.4% 9 Dallas-Fort Worth-Arlington, TX 110,531 2,167, % 5.1% 85.0% 10 Houston-Sugar Land-Baytown, TX 109,489 1,955, % 5.6% 84.5% 11 San Antonio, TX 21, , % 3.1% 83.7% 12 Tucson, AZ 10, , % 2.9% 85.8% 13 Nashville-Davidson--Murfreesboro--Franklin, TN 23, , % 3.9% 84.6% 14 Jacksonville, FL 17, , % 3.4% 83.9% 15 Sacramento--Arden-Arcade--Roseville, CA 32, , % 4.3% 83.9% 16 Denver-Aurora-Broomfield, CO 48, , % 5.0% 84.4% 17 Salt Lake City, UT 13, , % 3.7% 83.9% 18 Bradenton-Sarasota-Venice, FL 10, , % 3.7% 81.0% 19 Portland-Vancouver-Beaverton, OR-WA 32, , % 3.9% 83.8% 20 Tampa-St. Petersburg-Clearwater, FL 33,001 1,100, % 3.0% 80.4% From , there were 13 cities/metro areas in the U.S. with population growth of 20% or higher. All of these areas are located in the Southern or Western regions of the country. There are differences to highlight, as some cities have reached their peak, while others are likely to continue experiencing growth. Analyst Note: Income data is derived from data collected between 2007 and 2009 and represents a three-year average of yearly incomes. High-income households are those households with greater than $200,000 household average yearly income. Population change figures reflect the total population change through all sources, including births, migration, and deaths. Key Implication: One of the more appealing locations in the country is North Carolina. The Raleigh-Cary-Durham metro areas are known as the Research Triangle. This area is a growing center for technology and biotechnology research, which has led to 40% population growth. This area is also projected to have an exceptionally strong local economy in the coming years, as incomes and jobs are on the rise. In contrast, the Phoenix, Arizona metro area also saw rapid population growth of greater than 33% from Phoenix was developing very rapidly due to cheaper real estate and warmer weather. However, when the economy soured, the housing and construction market collapsed in Phoenix. This exhausted much of the growing wealth in the area and is cause for concern because the sustainability of such a high growth rate seems unlikely. 32 CHAPTER 1: Market Sizing

13 EXHIBIT 5.01 PRIMARY REASON FOR BEGINNING RELATIONSHIP WITH PRIMARY PROVIDER, 2010 Sources: Cerulli Associates, Phoenix Marketing International 20% 18.6% 15% 12.3% 10% 5% 9.6% 9.6% 8.2% 8.2% 7.4% 7.1% 6.0% 5.5% 5.2% 2.5% 0% Quality of service Reputation Referral Convenient from a locations trusted source Relationship with someone at the firm Strong investment performance Attractiveness of range of product and service offering Positive previous experience Competitive fees Followed my advisor from a previous institution Quality of Someone else relationship chose for me staff When asked why they choose to begin a relationship with their current primary provider, high-net-worth (HNW) households cite the quality of service (18.6%). The second-most common reason for beginning a relationship was the providers reputation (12.3%). Key Implication: Households cite service as a reason for beginning a relationship; however, it is difficult to truly judge the quality of service as a prospect. This leads Cerulli analysts to believe the emphasis placed on service reflects poor service at a previous provider. Indeed, service is among the top reasons a household chooses to leave their provider (see Exhibit 5.21). As such, in courting prospects, providers should emphasize responsiveness and expertise of their professional staff. Allowing a prospect to speak with current clients can demonstrate the quality of service and add validity to claims of service excellence. In addition to service, households have been placing an increased emphasis on reputation. In the post-madoff era, households are gravitating toward providers viewed as trustworthy. Importantly, this has opened doors for independent providers as HNW households continue to distrust larger institutions. Even highly regarded institutions that could compete on brand reputation alone no longer enjoy unquestioning trust from their clients. CHAPTER 5: Business Development 163