GlobalData Plc

More than meets the eye to managing client wealth

HNW investors have a propensity to seek the guidance of multiple advisors, yet they often keep them in the dark by granting access to just a proportion of their assets. Full disclosure would be beneficial to both sides.

From a HNW client’s perspective, working with three, four, or even five wealth managers has its benefits. Doing so not only enables the investor to distribute risk and diversify management styles, but it also provides them with access to a more complete package of products and services. Investors may also wish to allocate a small proportion of wealth to new advisors to test which offers the greatest returns.

Working with multiple wealth managers is common among HNW investors. GlobalData’s 2016 Global Wealth Managers Survey shows that 33.9% of HNW individuals work with three wealth managers, while 16.3% work with four or more. With over half of a typical HNW client’s total wealth overseen by their main wealth manager, a notable proportion of client assets are placed in the hands of other professionals.

But sharing a client’s portfolio with other professionals can create challenges at the expense of the wealth manager. It is the responsibility of an advisor to do what is best for their client, yet if they are unaware of how the remainder of the portfolio is managed it is difficult to make accurate and helpful decisions.

As such, wealth managers should seek full disclosure from their clients so they understand how the remainder of their wealth is managed. For example, providing clients with a digital platform through which they can view their entire portfolio is convenient not just to the investor but also the wealth manager. By enabling clients to aggregate details about their assets held with other providers, wealth managers can capture a better view of their client’s overall portfolio in one platform. Such tools do not need to be developed in-house – wealth managers can seek partnerships with existing personal financial management apps and account aggregators.

Another opportunity would be to incentivize existing clients to move wealth from a competitor. By waiving management fees on assets moved from another wealth manager for a certain period, wealth managers could improve transparency and trust with their clients, in addition to capturing greater market share and growing revenues in the long term.

Managing greater proportions of client assets is not just about revenue, though. Understanding the composition of the entire portfolio enables advisors to do their job better and make more informed decisions on the investor’s behalf. Wealth managers should ensure clients understand this logic and how they benefit from it.

By Nicole Douglas, Wealth Management Analyst

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