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High net-worth growth good for advice: Cerulli

High net-worth growth good for advice: Cerulli

A significant proportion of US high net-worth individuals have turned to self-directed investment as the UK faces a larger high net-worth base, research has found.

The Cerulli Associates report, High Net Worth and Ultra High Net Worth Markets 2014: Addressing the Unique Needs of Wealthy Families, found that approximately 30 per cent of US high net-worth investors defined themselves as self-directed.

The research found that more than half of high net-worth investors had direct or online trading account balances with a value of between $500,000 and $1m.

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Donnie Ethier, associate director at the research firm, said the trend could present an opportunity for various parts of the financial services industry.

He said: “High net-worth and ultra high net-worth clients that are using a self-directed model represent a significant opportunity for asset managers that pass due diligence screenings.”

But he added: “The self-directed model becomes less favourable relative to other advice models as assets increase.

“Logically, as assets increase, so does the complexity of portfolios, lending more credence to taking on external advice sources and provider relationships.

“In addition to dealing with complex portfolios, advisers are an added expenditure, which can explain their lower use among retail clients.”

In the UK, advisers could find themselves adapting to a growing presence of high net-worth individuals.

A report released in February suggested that in the UK, the demand for specialist tailored advice could increase because of a growing number of high net worth individuals in the UK.

The 78-page New World Wealth paper, The United Kingdom 2014 Wealth Report, found that the number of people with net assets of US$1m (£660,000) or more had fallen from approximately 839,000 in 2007 to 828,000 in 2013.

But according to projections made in the study, this figure could rise to 974,000 by 2017.

Adviser view

Chris Pearce, director, of Hertfordshire-based Aqua Wealth Management, said: “There are questions around how much time or expertise these investors have. There may be spilt milk from this, so I do not think it is a huge threat to financial advisers.”