PwC: Family wealth managers risk loss of client assets by failing to connect with heirs

Private banking and wealth managers risk losing client assets if they do not establish a relationship with heirs to the family fortune early enough, PwC global research shows.

Wealth managers must make greater efforts to connect with the children and charitable foundations that will inherit the assets of their direct clients, a biennial private banking and wealth management survey from auditing giant PwC suggested.

Loss of investors’ assets is less likely if loyalty is built up across generations, the report said.

Drawing its conclusions from respondents from 275 institutions in 67 countries, 62% of which are based in Europe, the firm calls for more effective client relationship management by service providers, and at an earlier stage.

“Waiting until inheritance occurs before starting this process is too late. Targeting heirs early represents an opportunity to continue long-term relationships with a family,” it said.

Private banking and wealth management outfits should endeavour to gain a better understanding of their clients’ long-term goals, it said.

A majority of the survey’s respondents, 81%, thought relationship managers at their firms greatly understood investors’ objectives.

But only 56% said they fully grasped clients’ overall financial goals, 34% said they understood their retirement income planning needs, and just 26% had a grip on extended family matters.

Meanwhile as little as 17% of respondents said client relationship managers had established a relationship with heirs to their clients’ fortune.

But clients are becoming institutionalised, the report also said. Only 23% of client relationship managers bring more than 40% of client assets with them when changing jobs, it said.

Clients prefer larger institutions that can provide the scale of services required to cater to generations of the same family, despite the managers themselves often wanting to move to boutiques to improve their independence and equity, it said.

“Many independent boutiques do not yet have the longevity to provide scale service to generations of the same family. Wealthy clients, with their multi-generation time horizons, are well aware of this,” it said.

Individual managers with fewer clients tend to perform better, the research said.

“The most profitable firms have, on average, far lower ratios of clients per client relationship manager,” it said. Typically, 54 investors with assets of $5mn to $10mn are shared between one manager, but institutions with the lowest cost-to-income ratios have just 26 investors per manager.

Wealth managers responding to the PwC survey also said they expected most of their revenue growth to come from Asia over the course of this year, with just under 20% of revenue sourced from that region, under 10% from Europe, the Middle East and Africa, and over 5% from the Americas.

In a further sign of the shift in wealth to the east, respondents said they expected Singapore to become the leading wealth management hub globally by 2013, knocking Switzerland off the top spot into second place. Hong Kong was meanwhile predicted to come in at third place, with London dropping from second to fourth place in the next two years. New York remained in fifth place.

PwC conducted the research between December 2010 and April 2011. The last survey was conducted in 2009.

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