Could the legacy of the Olympics inspire the private wealth industry too?
Marc Farror TEP, Director, Vistra (Jersey) Limited looks at strategies for successfully targeting the high net worth female client
Vistra sees parallels between the way the broadcast industry is now having to wake up to the needs of a new sporting market and the way successful female businesswomen, the Olympic champions of their fields, are likely to demand change from the private wealth management industry, as their influence and market share grows. Like broadcasting, private wealth management is often accused of adopting an approach and a business style designed essentially for a male market. According to several research studies, dissatisfaction appears to exist at many points during the wealth management process, whether at the superficial level of advertising or more generally in terms of the way the needs of the female market are considered and as a result, how female private clients are treated.
According to the current Cap Gemini Merrill Lynch world Wealth Report, more than one in four High Net Worth Individuals, i.e. those with more than $10 million of net assets, is female. Women accounted for 27% of the global HNWI population in 2010, up from 24% in 2008, so this is a growing market and a distinctive market segment in its own right. Regionally, significant differences emerge, partly due to cultural and business trends, but the report goes on to argue that the number of female HNWIs in he world is quite likely to rise to US levels where women account for more than a third of the high net worth population. In the Asia Pacific region, excluding Japan, the figure is 24%, whilst in Latin America, it is just 18%, suggesting significant change may be possible.
Outside of the HNW female client in her own right, wealth management practitioners also need to consider the demographics of their clients in the round. With an ageing population and therefore an ageing high net worth client base, statistically, the female is more likely to outlive the male. In this instance, therefore, it is reasonable to assume high net worth widows will also seek a more active role of the management of the family wealth.
Vistra believes this growing market might benefit from a more sympathetic approach which recognises its subtleties and specific needs. Quoting the example of a high net worth Asian client, Mrs Chong, (we have changed her name for confidentiality reasons) illustrates the point well.
A successful businesswoman in her own right, Mrs Chong has two daughters from a previous marriage when she remarried in Malaysia a few years back. Her new husband had been married previously too, and has a son and a daughter. With a considerable estate that she wished to leave to her own daughters, Mrs Chong was faced with something of a dilemma, as on religious grounds, she could lose all of her assets, should she die before her husband.
The reason for this is that Islam is recognised as the state religion of Malaysia, even though not all Malaysians are followers of Islam. In reality, politics too has become increasingly entwined with religion, complicating matters further, with Islam beginning to have more influence over day to day life in Malaysia. This was important for Mrs Chong, as it now meant she was more and more likely to be subject to Sharia Law with its forced heirship provisions, meaning her assets could well pass, in the first instance, to the first born son of her new husband, should she pre-decease her husband.
Mrs Chong represents tangible evidence of a demand for a new approach to a problem which needs to be more sympathetic to the female’s needs than to those of her new husband. The wealth management industry can respond to this challenge and indeed it has all of the tools needed to create a solution – in this case a series of trusts and companies which will hold assets offshore and therefore outside of the jurisdiction of Malaysian law, thus ensuring the preferences set down in her own Will take precedence over any State laws and her assets can pass smoothly to her daughters. What differed on this occasion was that those charged with providing a solution responded from the perspective of protecting firstly the mother, then her daughters’ needs, before those of any male member of the family.
Sadly this approach to the female high net worth client is far from being repeated regularly within the industry. Boston Consulting Group’s 2010 report, “Upgrading the Wealth Management Experience for Women” found that 55% of respon¬dents thought that wealth managers could do a better job of meeting the advisory needs of women, whilst a further 24% said that private banks could signifi¬cantly improve how they serve women. What most wealth management practitioners agree on is that any attempt to design a bespoke product for this market must not patronise or stereotype the HNW female client.
Boston Consulting Group’s research findings illustrate just how hard the challenge is likely to be. The female client wants the same attention, advice and terms that her male counterpart receives and certainly does not want to be offered “dumbed down” products. Advisors are expected to provide clear and objective recommendations based on a rigorous analysis. At the same time, 70% of respondents felt advisors should tailor their offering specifically to the needs of the female market.
Yet the industry needs to be able to respond to cases such as Mrs. Chong, where the outcome created cannot be a repeat of a prepackaged, male oriented solution. Female clients will reject this option, as the life challenges they face are likely to be more drastic and clear cut than those of many men – marriage, the start of a family, the death of a spouse who may well be the main earner and divorce are all likely to bring significant changes to risk tolerance but more importantly, such events will demand a wealth planning approach which is flexible and far more in tune with that individual’s life stage and needs.
The challenges facing practitioners who want to target this market are therefore complex and often contradictory. The metrics of the market are very real, both for the female high net worth in her own right and as the surviving spouse in a relationship where the male was the major breadwinner. All the evidence suggests that the female client will want to be engaged in the business of managing their wealth and she may well want to use her own business experience and expertise to support investment decisions and risk calculations.
Bringing these themes together into a coherent, effective and well managed whole requires a broad skill set which will certainly include an ability to listen and an ability for an organisation to display flexibility. Perhaps though, what the market really needs is something which is closer to the original idea underpinning private client management – a bespoke approach. As many larger wealth managers try to squeeze costs from their business models by standardising their portfolio offerings, so it is precisely this group which is least likely to appeal to the high net worth female client.
Organisations such as Vistra, who have an approach to family office and private client management which is built from the perspective of providing a highly individualised solution to a client’s brief, are likely to be in a far stronger position to demonstrate the adaptability this market demands. At the same time, with 23 offices across 19 jurisdictions and an ability to understand global financial flows, international taxation, international investment, governance and the ability to create the most appropriate structures for private clients, Vistra is well placed to meet the intellectual and technical challenges posed by this growing market too.