In spite of the strong performance in Asia-Pacific markets in 2017, HNWIs in the region are dissatisfied with their wealth managers, according to Capgemini’s 2018 Asia-Pacific wealth report.
The overall satisfaction scores of HNWIs in Asia-Pacific (ex-Japan) did not exceed the “passing grade” of 70%. In addition, scores were also lower when compared to their global peers.
Satisfaction score with wealth manager and wealth management firm
| Q2 2017 | Q1 2018 | ||
| Wealth manager (relationship manager) | APAC (ex-Japan) | 57% | 62.4% |
| Rest of world | 59.9% | 69.5% | |
| Wealth management firm | APAC (ex-Japan) | 57.4% | 61.5% |
| Rest of world | 62.3% | 69.8% |
Source: Capgemini
The satisfaction is even lower for the region’s ultra high net worth (UHNW) segment, or those with investable assets of at least $20m, with only 53.6% of them satisfied with their wealth manager and 44.3% satisfied with the wealth management firm, the report noted.
“Considering that Asia-Pacific (ex-Japan) HNWI satisfaction does not directly correlate to investment returns, wealth management firms may want to identify HNWI pain points and offer innovative solutions to improve HNWI satisfaction,” the report said.
Concerns
HNWIs in the region have indicated various concerns about their wealth managers.
One of them is fees, with only 57.4% of the region’s HNWIs indicating that they were comfortable with the fees they pay. Fee transparency was cited as a top concern.
Primary concerns related to fees (% response)
| Fees charged | 13.3% |
| Transparency | 24.4% |
| Value delivered | 19.6% |
| Unexpected charges | 14.5% |
Source: Capgemini
HNWIs have also indicated the need to have a more “personal connection” with their wealth manager. At least a third of those surveyed said they do not connect very well with their wealth managers.
Satisfaction toward hybrid advisory services, which combines face-to-face and online advice, also decreased to 65.8% this year from 70.6% last year.
The report noted that none of Asia-Pacific wealth managers have made a complete hybrid-advice transformation. Half of the firms surveyed said they were “defining” or “conceptualising” their transformation, while the other half said their transformation programme was underway.
In comparison, for the rest of the world, only 6% of firms were in the defining or conceptualising stage, and at least 35% of firms had completed their transformation.
Other factors such as staff turnover, regulatory compliance, cybersecurity threats and ineffective digital infrastructure affect firms’ service capabilities and can drive down HNW client satisfaction, the report added.
Cash allocation up
Separately, the report noted that although equities remained the dominant asset class in Asia-Pacific ex-Japan HNWI portfolios, cash now accounts for at least a quarter of holdings.
| Asia-Pacific (ex-Japan) | Rest of the world | |||
| 2017 | 2018 | 2017 | 2018 | |
| Alternatives | 10.4% | 9.9% | 10.2% | 10.5% |
| Fixed income | 18.3% | 17.4% | 19.3% | 17.1% |
| Real estate | 18.7% | 20.1% | 14.5% | 17.5% |
| Cash | 24.9% | 26.2% | 22.4% | 22.5% |
| Equities | 27.7% | 26.4% | 33.7% | 32.4% |
Source: Capgemini
The report explained that Asia’s HNWIs actively re-allocated to cash to avoid diluting their cash-holding percentage share.
“This was possibly done to hedge against market volatility, given the arguably late-cycle stage of the current global bull market in equities, as well as for lifestyle spending,” the report said.
Real estate allocations among Asia’s HNWIs also increased from the previous year, the report said, adding that the asset class is likely to have benefited from rising valuations on existing holdings and not from any massive inflows into the asset class.
Within the real estate category, residential is the primary sub-class at 46.8% of all real estate holdings, followed by commercial at 21.1% and land at 12.2%.
