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

Powered by

All the vital news, analysis, and commentary curated by our industry experts.

$5250

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. HNW clients under 35 years old and first-generation entrepreneurs are most likely to self-direct their investments. 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. Advances in digital technology are contributing to the growing interest in DIY investments, particularly in Asia Pacific. Traditional brokerage business models are being challenged by the growing number of platforms offering automated investment solutions (robo-advisors). The increasing popularity of exchange-traded funds (ETFs) and peer-to-peer (P2P) lending platforms has started to affect the business of wealth managers.

Scope

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:

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

• Analyzes the demographics of DIY investors

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

• Examines client targeting strategies of brokerages and robo-advisors

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

Reasons to Buy

Discover how much HNW wealth is invested independently from wealth managers

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

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

Understand how the rise of robo-advisors and the growing popularity of ETFs and P2P lending affects the wider wealth management industry

Barclays
Charles Stanley
Fidelity
Hargreaves Lansdown
Interactive Investor
TD Ameritrade
Merrill Edge
Charles Schwab
Scottrade
Fidelity
Bank of America Merrill Lynch
Betterment
Wealth front
Wells Fargo
UBS
National Australia Bank
SCM Direct
Street Shares

Table of Contents

EXECUTIVE SUMMARY

Self-directed investors remain a lucrative target group for wealth managers

Key findings

Critical success factors

SIZING THE GLOBAL MARKET FOR SELF-DIRECTED INVESTMENT

Defining the self-directed investment market

Globally execution-only mandates constitute

19.1% of total HNW assets held with wealth managers

HNW clients in Central and Eastern Europe have the strongest inclination to use execution-only services

Among developed markets, execution-only platforms are popular particularly in France

Over a quarter of global HNW wealth is invested independently of wealth managers

Users of execution-only mandates are also likely to self-direct through third-party services

The HNW self-directed market is largest in the US and China

The US HNW self-directed market alone is worth $2.6tn

Demand for execution-only services will grow, but will be outstripped by advised services

Prior to MIFID coming into force, minimal change is forecast in the European self-directed market

Mass affluent investors use advice less frequently than HNW individuals

The mass affluent self-directed market represents an opportunity for wealth managers

GLOBAL DRIVERS FOR SELF-DIRECTED INVESTMENT

Demographics are essential to understanding the self-directed market

First-generation entrepreneurs are likely to invest independently

Younger investors also show a tendency to self-direct

Wealth managers should consider long-term demographic trends

Drivers for self-directed investment differ between developed and developing economies

Price sensitivity is more prevalent in developed markets, but is not the only driver

The desire to maintain control and financial sophistication trump price concerns in Australia and the UK

Digital solutions have boosted the execution-only market in Asia Pacific

Drivers for mass affluent self-investment differ from the HNW segment

The UK: the lower the value of investments, the greater the price sensitivity

UNDERSTANDING THE COMPETITIVE LANDSCAPE

Execution-only asset management services are available through the majority of HNW-focused wealth managers

Wealth managers' execution-only platforms have been exclusive to HNW clients

Brokerages are typically a mass affluent proposition

Brokerages have low investment thresholds

Some competitors differentiate their offerings for wealthier clients

Automated investment advice providers are growing in number

Robo-advisors appeal to a similar segment of clients as brokerages

Wealth managers can leverage robo-advisor features

PRODUCT ENVIRONMENT IN THE SELF-DIRECTED MARKET

Self-directed investors tend to have deposit-heavy portfolios

Assets held in deposits can be easily transferred to more sophisticated products

Self-directed investors contribute to the growth of ETF assets

ETFs appeal to price-sensitive clients

Wealth managers can leverage ETFs in advisory or discretionary mandates too

Some markets still lack easy access to the ETP market

P2P lending and crowd funding attract self-directed HNW investors

Retail and mass affluent investors are active in the P2P market

Wealth managers should choose the products available via their execution-only services carefully

APPENDIX

Abbreviations and acronyms

Definitions

Developed (mature) economies or markets

Developing (emerging) economies or markets

HNW

ISA

Liquid assets

Mass affluent

Mass market

Net inflows

Methodology

Sizing the self-directed and execution-only markets

Verdict Financials 2015 Global Wealth Managers Survey

Verdict Financials 2014 Global Wealth Managers Survey

Verdict Financials 2015 Global Retail Banking Survey

Our Retail Banking Insight Survey was conducted online among 17,000 consumers across 20 global markets. Fieldwork was conducted during June to July

2015.

The survey covers product holdings, product characteristics, methods of arrangement, channel usage, advocacy, drivers of choice, motivation, and consumer attitudes.

The number of respondents for any particular question will depend on an individual's characteristics, their financial product holding, and their interest in that area. In all our research Verdict Financial specifies a demographically representative sample for all the countries surveyed, ensuring an accurate sample of a country's total (online) population.

The survey is conducted on an annual basis, and the countries surveyed are reviewed each year to ensure that we are meeting client priorities.

Cross-comparison of the HNW segment vs the mass affluent and mass market segments

Exchange rates

Bibliography

Further reading

Reports

Interviews

About Verdict Financial

Disclaimer

Table

Table 1: Minimum investment thresholds of selected UK brokerages (£)

Table 2: Minimum investment thresholds of selected US brokerages ($)

Table 3: Basic fees and charges of selected US brokerages ($), for transactions made online

Table 4: Pound sterling-US dollar exchange rate, December 31, 2014 and December 31, 2015

Figures

Figure 1: HNW clients in Central and Eastern Europe are most likely to use execution-only platforms

Figure 2: Execution-only services are not popular among UK HNW investors

Figure 3: Globally over a quarter of HNW investment portfolios are not allocated within wealth managers' services

Figure 4: The US is the biggest self-directed market in terms of HNW liquid assets

Figure 5: Demand for advised mandates will grow faster than for execution-only services

Figure 6: The greatest growth in demand for execution-only platforms is expected in the Americas

Figure 7: Mass affluent investors are more likely to arrange their portfolios without advice than HNW clients

Figure 8: The US represents the biggest opportunity for competitors targeting self-directed mass affluent investors

Figure 9: Execution-only services are in demand among first-generation entrepreneurs

Figure 10: The HNW population in Central and Eastern Europe self-direct despite comprising only a small proportion of young individuals

Figure 11: The drivers for choosing execution-only platforms differ between developed and emerging markets

Figure 12: Swiss and US self-directed investors want to save on management fees

Figure 13: HNW clients in Asia Pacific are frequent users of digital investment tools

Figure 14: Mass affluent investors self-direct because they believe investing is simple

Figure 15: In the UK, the wealthier the individual, the higher the trust in professional advisors

Figure 16: Most wealth managers provide execution-only platforms for HNW clients

Figure 17: Fidelity has a graduated proposition

Figure 18: Assets managed by robo-advisors comprise only a fraction of the wider industry

Figure 19: US HNW individuals prefer to discuss their portfolios rather than have them managed by an automated platform

Figure 20: Current portfolio reviews and low costs attract HNW clients to robo-advisors globally

Figure 21: Wealth managers recognize the benefits of automated investment platforms

Figure 22: Self-directed investors are likely to opt for near-cash products

Figure 23: Although ETPs are cheaper then mutual funds, they do not necessarily perform better

Figure 24: Wealth managers should include ETPs when building portfolios in advised or discretionary mandates

Figure 25: HNW clients in markets like Poland have limited access to ETFs

Figure 26: The P2P lending market in the UK has been growing rapidly

Frequently asked questions

Self-Directed Investors: Implications for Wealth Managers; Understanding how self-directed investment affects the wealth management industry. thematic reports
Currency USD
$5,250

Can be used by individual purchaser only

$15,750

Can be shared globally by unlimited users within the purchasing corporation e.g. all employees of a single company


Undecided about purchasing this report?

Enquire Before Buying

Get in touch to find out about multi-purchase discounts

reportstore@globaldata.com
Tel +44 20 7947 2745

Every customer’s requirement is unique. With over 220,000 construction projects tracked, we can create a tailored dataset for you based on the types of projects you are looking for. Please get in touch with your specific requirements and we can send you a quote.

See what our customers are saying

“The GlobalData platform is our go-to tool for intelligence services. GlobalData provides an easy way to access comprehensive intelligence data around multiple sectors, which essentially makes it a one-for-all intelligence platform, for tendering and approaching customers.

GlobalData is very customer orientated, with a high degree of personalised services, which benefits everyday use. The highly detailed project intelligence and forecast reports can be utilised across multiple departments and workflow scopes, from operational to strategic level, and often support strategic decisions. GlobalData Analytics and visualisation solutions has contributed positively when preparing management presentations and strategic papers.”

Business Intelligence & Marketing Manager, SAL Heavy Lift

“COVID-19 has caused significant interference to our business and the COVID-19 intelligence from GlobalData has helped us reach better decisions around strategy. These two highlights have helped enormously to understand the projections into the future concerning our business units, we also utilise the project database to source new projects for Liebherr-Werk to use as an additional source to pitch for new business.”

Market Analyst & Management, Liebherr-Werk

Your daily news has saved me a lot of time and keeps me up-to-date with what is happening in the market, I like that you almost always have a link to the source origin. We also use your market data in our Strategic Business Process to support our business decisions. By having everything in one place on the Intelligence Center it has saved me a lot of time versus looking on different sources, the alert function also helps with this.

Head of Key Accounts, Saab AB

Having used several other market research companies, I find that GlobalData manages to provide that ‘difficult-to-get’ market data that others can’t, as well as very diverse and complete consumer surveys.

Marketing Intelligence Manager, Portugal Foods

Our experience with GlobalData has been very good, from the platform itself to the people. I find that the analysts and the account team have a high level of customer focus and responsiveness and therefore I can always rely on. The platform is more holistic than other providers. It is convenient and almost like a one stop shop. The pricing suite is highly competitive and value for our organisation.

I like reports that inform new segments such as the analysis on generation Z, millennials, the impact of COVID 19 to our banking customers and their new channel habits. Secondly the specialist insight on affluent sector significantly increases our understanding about this group of customers. The combination of those give us depth and breadth of the evolving market.

I’m in the business of answering and helping people make decisions so with the intelligence center I can do that, effectively and efficiently. I can share quickly key insights that answer and satisfy our country stakeholders by giving them many quality studies and primary research about competitive landscape beyond the outlook of our bank. It helps me be seen as an advisory partner and that makes a big difference. A big benefit of our subscription is that no one holds the whole data and because it allows so many people, so many different parts of our organisation have access, it enables all teams to have the same level of knowledge and decision support.

Head of Customer Insight and Research, Standard Chartered

“I know that I can always rely on Globaldata’s work when I’m searching for the right consumer and market insights. I use Globaldata insights to understand the changing market & consumer landscape and help create better taste & wellbeing solutions for our customers in food, beverage and healthcare industries.

Globaldata has the right data and the reports are of very high quality compared to your competitors. Globaldata not only has overall market sizes & consumer insights on food & beverages but also provides insights at the ingredient & flavour level. That is key for B2B companies like Givaudan. This way we understand our customers’ business and also gain insight to our unique industry”

Head of Consumer Sensory Insights, Givaudan

GlobalData provides a great range of information and reports on various sectors that is highly relevant, timely, easy to access and utilise.  The reports and data dashboards help engagement with clients; they provide valuable industry and market insights that can enrich client conversations and can help in the shaping of value propositions. Moreover, using GlobalData products has helped increase my knowledge of the finance sector, the players within it, and the general threats and opportunities.

I find the consumer surveys that are carried out to be extremely beneficial and not something I have seen anywhere else. They provided an insightful view of why and which consumers take (or don’t) particular financial products. This can help shape conversations with clients to ensure they make the right strategic decisions for their business.

One of the challenges I have found is that data in the payments space is often piecemeal. With GD all of the data I need is in one place, but it also comes with additional market reports that provide useful extra context and information. Having the ability to set-up alerts on relevant movements in the industry, be it competitors or customers, and have them emailed directly to me, ensures I get early sight of industry activity and don’t have to search for news.

Senior Account Manager, TSYS
Go even deeper with GlobalData Intelligence Center

Every Company Report we produce is powered by the GlobalData Intelligence Center.

Subscribing to our intelligence platform means you can monitor developments at Self-Directed Investors: Implications for Wealth Managers; Understanding how self-directed investment affects the wealth management industry. in real time.

  • Access a live Self-Directed Investors: Implications for Wealth Managers; Understanding how self-directed investment affects the wealth management industry. dashboard for 12 months, with up-to-the-minute insights.
  • Fuel your decision making with real-time deal coverage and media activity.
  • Turn insights on financials, deals, products and pipelines into powerful agents of commercial advantage.