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Catering to high-net-worth investors requires asset and wealth managers to position capital preservation and tax-effective solutions
May 2020, Boston—Asset and wealth managers currently servicing or seeking to grow their marketshare in the high-net-worth (HNW) market must be prepared to address investor needs with specific and targeted strategies that can protect client capital in increasingly volatile markets. Positioning capital preservation and tax-effective solutions will be of utmost importance for firms seeking to preserve and grow their share of market, according to The Cerulli Report—U.S. High-Net-Worth and Ultra-Net-Worth Markets 2019.
Cerulli classifies HNW households as those with greater than $5 million in investable assets and ultra-high-net-worth (UHNW) households as those that own a minimum of $20 million. When serving investors at the high end of the wealth spectrum, Cerulli finds that investment objectives shift away from wealth accumulation and toward preserving capital and tax efficiency. As more HNW investors re-evaluate their financial situation amidst the COVID-19 pandemic, providers must ensure that they are well aligned with their clients’ long-term objectives.
More than four-fifths (83%) of HNW practices say wealth preservation is the most important investment objective when working with their clients, according to Cerulli’s research. Tax minimization (64%), wealth transfer (61%), and risk management (57%) are also rated as very important by more than half of HNW practices. Firms need to be mindful of these underlying objectives and look to position relevant strategies that can help HNW investors minimize taxes and preserve wealth over time.
“As competition for HNW marketshare intensifies, asset managers that are able to provide relevant and timely solutions to meet the evolving needs of HNW investors will stand to benefit in the current market environment,” according to senior analyst, Asher Cheses.
Overall, HNW clients tend to be among the most sophisticated investors, and they often require a wide range of investment solutions to maintain their wealth across multiple generations. Given the complex needs of HNW clients, factors such as tax efficiency, long-term financial planning, and family governance are highly valued. Advisors therefore need to be prepared to construct portfolios that take the appropriate risks into account and can weather the ups and downs of market cycles.
“More than ever, in a period of heightened market uncertainty, wealth managers need to harness their value-added services to prove their worth and approach clients’ investment goals and priorities in a strategic manner,” adds Cheses.
NOTES TO EDITORS:
These findings and more are from The Cerulli Report—U.S. High-Net-Worth and Ultra-Net-Worth Markets 2019: Multigenerational Shifts in Wealth.
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