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Global HNWI financial activity hits all-time high

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High-Net-Worth (HNW) clients worldwide are managing their finances at the highest levels since 2011, according to CEB, a member-based advisory company. 

Data from the company's biannual Consumer Financial Monitor also suggests that financial providers who build trust with the HNW client will be most likely to fully realise the benefits of the heightened activity. In order to succeed in this competitive environment, however, providers must go beyond product satisfaction to build a more complete client experience that prioritises advice and service. 

Proactive financial management among the global HNW hit an all-time high since CEB began measuring it in 2011, with a reading of 51% in the second half of 2014. This marks an 11% climb over the same period, according to the Consumer Financial Monitor. CEB measures financial proactive management by looking at client use of financial advisors, financial planning activities and formal budgeting. The uptick in activity can be traced to a variety of factors, including ongoing volatility in the euro zone, which has threatened the stability of specific financial institutions, and increased scrutiny of tax-avoidance strategies and tax havens.  

In CEB's latest survey, HNW clients reported robust satisfaction with financial products (+34% net rating) and continued comfort with their personal financial situations (+27% net rating). Institutions, however, are not earning much credit for those ratings. HNW clients maintain a decidedly negative view (-16% net rating) when it comes to confidence in their providers. This continued distrust is troubling for the Financial Services industry. Even as it receives high marks on product satisfaction and benefits from a healing economy, particularly for the wealthiest, distrust has also prompted clients to spread their wealth more widely among providers and to invest in more conservative–and lower margin–products.

Additional CEB research suggests providers will struggle to differentiate themselves with products that can now be easily replicated by non-traditional entrants at low cost. Instead, they need to win on a comprehensive approach to advisory support that prizes fair and transparent services and client specific advice that goes beyond the transactional.

"Most wealthy clients are comfortable with their balance sheets and are satisfied with the product offerings available to them. But our data shows plainly that, 'this is not enough,'" says Peter Aykens, managing director at CEB. "Too many companies believe they can rely on their portfolio of products and episodic touches with their clients to maintain relationships.  We've learned that's insufficient to win. Rather, financial institutions must move beyond the rhetoric of advice to actually delivering it. They need to offer high-net-worth clients an advisory experience that demonstrates ongoing value and care in order to capture the full value of relationships at this level. If these clients don't receive that, it's clear from the data they will look elsewhere."

Specifically, CEB counsels wealth managers to move from engaging clients episodically to providing advice continuously across the life of the relationship; to begin providing insight-based value to clients rather than relying on short-term investment performance benchmarks; and making the hard organisational choices required to deliver client-centred, rather than product-centred, advice.

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