Preserving wealth becomes priority

But investors are nervous; they are more focused on capital preservation than capital growth and during the course of 2012, they have placed more pressure on their financial advisers.

Wealth managers are also under pressure from regulatory changes and are being forced to adapt to the changing environment.

The World Wealth Report, published in June, said the biggest driver of growth in portfolios of high net-worth individuals (investors with more than US$1m (£647,000) to invest) was the growth in equity markets. This helped push aggregate investable wealth up 10 per cent to $46.2 trillion (£29.9 trillion).

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The report said: “Market performance has a very strong impact on HNWI wealth and in 2012 this effect was remarkably positive, given the healthy gains made in most markets around the world.”

It cites the Global MSCI Benchmark Index increasing 13.2 per cent during the year, with a strong performance in Germany, Mexico and India. However, it also mentions the robust returns of fixed income throughout 2012.

The strong performance of some asset classes resulted in an increase in the number of HNWIs. Hong Kong saw a 36 per cent rise in the number of HNWIs, based on less conservative investing behaviour and strong equity markets. Meanwhile, India saw 22 per cent increase.

However, as investors continue to see their portfolios rise in value, they are placing more importance on their relationship with their advisers, as the economic climate remains uncertain.

The report said: “Wealth manager competency emerged as the single largest service priority among HNWIs, with 67.5 per cent rating it as most important. Globally, 52.6 per cent of HNWIs gave their advisers and support staff a strong performance rating in this area.”

The general disposition of investors is towards wealth preservation, with nearly 30 per cent of financial wealth invested in cash and deposits.

The report said: “Even HNWIs who identified growth as their primary focus put 26.4 per cent of their assets into cash, only slightly less than HNWIs primarily focused on capital preservation who put 29.7 per cent of their assets in cash.”

This tendency towards wealth preservation is more prevalent among older HNWIs and those in the upper wealth segment – individuals, for example, with holdings of $20m (£12.9m).

When it came to their advisers, the competence of the person dealing with the investor has become paramount. The report said: “Wealth manager competency has been identified by HNWIs as a top priority.”

Another theme that emerged from the report was investors’ desire to have one point of contact for their portfolios. The report said slightly more than 41 per cent of HNWIs would prefer to deal with a single firm for all their financial needs, rather than a whole range of companies.

A significant factor in the wealth management industry is the impact of regulatory change. The RDR in the UK has caused much disruption, as has Part II MiFID and AIFMD. In the US there is the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the Foreign Account Tax Compliance Act.