GlobalData’s new research has found that wealth managers need to ensure that high-net-wealth investors met customers’ liquidity needs while not sacrificing the bottom line.
Senior analyst for GlobalData Heike van den Hoevel said that it would require a tight rope act in order to navigate the challenge.
“Navigating this challenge means walking a fine line of addressing customers’ liquidity needs while meeting return expectations without having to suffer a drop in fee income,” he said.
High-net-wealth investors had little incentive to allocate funds to cash or near-cash investments in recent years but GlobalData said that trend was changing.
A report from the group, the HNW Asset Allocation Trends 2019, found that allocations in cash have dropped from 23.5 per cent in 2015 to just 13.2 per cent in 2018.
Mr van den Hoevel said the data showed a growing demand for these cash products to provide a barrier for investors.
“This will have a direct effect on wealth managers’ bottom line, limiting fee-earning potential. In addition, wealth managers will struggle to achieve the returns clients have become accustomed to over the past few years as interest rates remain low,” he said.
According to the research 46 per cent of HNW investors have sourced their wealth through some king of entrepreneurship and as uncertainty pics up entrepreneurs feel the need to increase cash holdings.
“As global uncertainty is unlikely to subside any time soon, heightened HNW demand for liquidity is expected to persist, meaning offering cash management tools and credit is mandatory for any wealth manager,” said Mr van den Hoevel.
