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Host: Greg King, FactSet
Speakers: Annie Catchpole and Tasha Vashisht, Scorpio Partnership
What HNWIs Expect in a New Era of VolatilityA FactSet Webcast
Webcast Housekeeping
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Building Resilience
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Against a context of volatility, one must question whether the existing frameworks for understanding and measuringrisk in the advisory relationship are sufficient.
FactSet & Scorpio Partnership
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Annie CatchpoleDirector
Tasha VashishtSenior Manager
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1123
688
434
177
442504
304203
156203
75 75 107
413 418
291
62
453
334274
0
200
400
600
800
1000
1200
Over
all
Male
Fema
le
Unde
r 35s
35-5
4
55 or
abov
e UK US
Cana
da
Sing
apor
e
Hong
Kon
g
Switz
erlan
d
Austr
alia
$500
k - $1
m
$1m
- $20
m
Over
$20m
Activ
e risk
take
rs
Mode
rate
risk t
aker
s
Risk
aver
se
Risk
mini
mise
rs
Gender Age Region Net worth Risk statements
Samp
le siz
eThe research audience
The average net worth of our sample was $2 million.
Our survey highlights four types of risk wealth managers need to address…
The Market Shock• Sudden and unexpected market events catch investors off guard• Clients need confidence and reassurance that their overall plans are robust enough to withstand cyclical movements
The Blind Spot• Investor education has missed the mark, despite HNWIs having so much information at their fingertips• The gap between advisor and client knowledge is growing dangerously wide
The Weak Link• Many HNWIs are tempted by knee-jerk responses to market events because they do not understand their own risk profiles• Firms have failed to make their risk profiling processes clear and transparent
The Achilles’ Heel• Regulation and margin compression have intensified the context in which wealth firms operate• Advisors are considered susceptible to slip-ups of communication and judgement
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In an uncertain era, investors are starting to believe change may be the only sure bet…
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0%
10%
20%
30%
40%
50%
60%
70%
80%
The impact ofunexpected
market events/ systemic risk
Politicaluncertainty
Cyber-security/ fraud and
identity theft
Changingregulatorylandscape
Receivingunsuitable
advice basedon my needs
and risk profile
Impact ofenvironmental
change
Access toknowledge orability to carry
out myfinancial plan
Unsuitable orunclear
financial plan
Notunderstanding
the advice Ireceive
Other None of theabove
% of
resp
onde
nts
UK US Canada Singapore Hong Kong Switzerland Australia Overall
Q: Do you have any major concerns about being able to grow your wealth?
… With decision paralysis the most common response to wealth creation opportunities
Q: How are you responding to these opportunities / threats in the context of your investment portfolio?
Advisors have overlooked a Blind Spot – HNWIs are confused by basic investing terminology
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Q. Firstly, we’d like to determine how you assess risk in the context of a portfolio. Which of these portfolios carries the most risk?
13% 12% 3% 2%
77% 76% 81% 85% 85%
4% 5% 8% 3% 4%6% 7% 8% 10% 11%
0%20%40%60%80%
100%
% of
resp
onde
nts
Aggressive investors should only invest in this stockThe stock’s value will remain steadyThe value of the stock will fluctuate over a large range of valuesThe stock is guaranteed to have high returns
Q. If a stock has ‘high volatility’, what does this mean?
64% 20%
16%
Investor resources should use less jargon and highlight key actions to improve understanding
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0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Highlight thekey points
Detail therisks faced by
specificproducts or
asset classes
Assessmentof how therisk in myportfolio
differs frommy riskprofile
Provide morecustomisedinformation
for myportfolio
Clarify whatactions
investorsshould take
Use lessjargon
Insight intothe portfoliocompositionof investors
like me
Accessupdatesdigitally
Use morevisual /graphic
depictionswithin content
Organisemore
frequentcirculation of
updates
Include moretechnical
commentaryfor advanced
investors
Other
% of
resp
onde
nts
Under 35s 35-54 55 or above Overall
Q: How could the information on risk provided to you by your wealth managers be made more useful?
Many HNWIs do not fully understand the significance of the risk profile assigned to them
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0%
10%
20%
30%
40%
50%
60%
Career events(e.g.
retirement,redundancy)
Personalfactors (e.g.
marriage, birthof child,divorce)
My overallportfolio
changed (e.g.real estatepurchase,
inheritance,sale of
business)
Relocation to adifferentcountry
Market events(e.g. long-term
investmenttrends)
Political events(e.g. changesin leadership
or policy)
I felt that myinitial riskprofile no
longeraccurately
reflects my risktolerance
My financialadvisor
recommendedthat I change it
I switched to adifferentprimaryfinancialadvisor
Other I don't know / Iprefer not to
say
Anticipated Non-anticipated Financial advisor-related Other
% of
resp
onde
nts
Yes - it is constantly changing Yes - it has changed once or twice
Q. Has your risk profile changed since your initial risk profiling assessment? / What has prompted the change(s) to your risk profile?
0%
10%
20%
30%
40%
50%
My preferences aresubject to
interpretation by myrelationship
manager
The information Ireceive may not be
fully accurate
My relationshipmanager may be too
busy to respondpromptly to my
requests
If my relationship manager left the firm, I don’t think
anyone else at the firm would properly
understand my needs
Our conversationsmay not be properly
recorded
I could doubt theintegrity of myrelationship
manager
Other There are no risksassociated with ahuman personal
advisor
% of
resp
onde
nts
UK US Canada Singapore Hong Kong Switzerland Australia Overall
Financial technology could help Wealth Managers augment their advisory relationships…
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Q: What risks do you associate with working with a human financial advisor?
0%
10%
20%
30%
40%
50%
60%
Cyber-attacks System errors /technology glitches
My needs will not befully understood
Relevance andaccuracy ofinformation
Relevance of advice Poor userexperience
Other There are no risksassociated with the
online wealthmanagementexperience
% of
resp
onde
nts
UK US Canada Singapore Hong Kong Switzerland Australia Overall
…But they must also reassure clients that technology solutions are robust and secure
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Q. What risks do you associate with your online interactions with your wealth management firm?
10 Ways to Build Resilience in Wealth Management
1. Deploy digital solutions to stimulate investment execution
2. Use technology to complement KYC efforts
3. Clarify the significance of risk profiling for investor activity
4. Address investor blind spots through interactive education
5. Customize content to demographic demands
6. Demonstrate that wealth plans are shock-resistant
7. Provide full visibility of portfolio composition
8. Harness systems that can quickly communicate the “house view”
9. Introduce behavioral data to understand client sentiment
10. Proactively initiate discussions of investor concerns
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Questions?
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Thank-you