High-net-worth (HNW) households—those with between $5 million and $20 million in financial assets—now control 40% of the addressable assets in the U.S., up from 18% in 2013. With the continued rapid growth in both population and assets of the U.S. HNW demographic, asset managers are increasing their focus on distribution efforts to HNW-focused advisor practices, according to The Cerulli Edge—The Americas Asset and Wealth Management Edition.
The increase in the number of independent affiliation options for financial advisors has led to an influx of HNW clients following their advisors into these advisory practices, and asset managers are eager to leverage this shift. Distribution executives focused on the HNW market believe independent registered investment advisors (RIAs) (79%) present the best opportunity over the next three years.
“Advisors who primarily serve HNW clients are prime prospects for asset manager distribution teams looking to sell alternative investments and other complex products,” says Chayce Horton, associate director. “However, advisors can be hesitant to invest in these products because of a lack of knowledge about them. Many are turning to asset managers for guidance and insights into these products.”
According to Cerulli, nearly half of HNW advisor practices rank access to portfolio managers or product specialists (49%) as one of the top-three most valuable resources offered by asset managers, topped only by portfolio construction resources (59%). Cerulli recommends that asset managers increase the number of product specialists within their distribution teams, especially those who engage with HNW advisors.
“Asset managers must proactively offer advisors access to product specialists, along with relevant educational and marketing materials, when distributing alternatives and other complex products,” says Horton. “Independent RIAs, which distribution executives identify as a top distribution opportunity, also value additional educational resources, as they typically are more isolated and less likely to have a comprehensive suite of resources available to them. Distribution teams aiming to grow their HNW business must demonstrate extensive product specialization and expertise to be successful,” he concludes.
