HNWI Investing: Challenges and Remedies

By: Gridline Team | Published: 07/18/2022
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3 minutes

High-net-worth individuals (HNWIs) are an essential target market for asset managers. They tend to be more active and engaged investors, and as a result, they are often willing to pay higher fees for products and services that meet their needs.

However, HNWIs also tend to be more demanding investors and are often quick to move their assets if they feel their needs are not being met. This can pose a challenge for asset managers, who need to ensure that they offer products and services tailored to the specific needs of HNWIs.

The Boston Consulting Group's Global Wealth Report 2022 provides insights into the challenges faced by asset managers when servicing clients.

Sources of HNWI Client Friction

Compared to VHNWIs and UHNWIs, HNWIs (with investable assets from $1 million to $4 million) are typically less financially sophisticated and have less invested assets. As a result, they often require more education and direction from their asset managers.

One of the challenges faced by asset managers is that HNWIs often have less patience for complexity, and they are quick to move their assets if they feel that their needs are not being met. This can be a problem if asset managers are offering products that are too complex or if they are not providing enough support to help HNWIs understand the products.

Another challenge is that HNWIs often have less tolerance for fees that are not transparent. They want to know exactly what they are paying for, and opacity around fees can be a quick way to lose their business.

Furthermore, HNWIs often have less financial literacy than VHNWIs and UHNWIs, and this can make it difficult for them to understand the products and services that they are being offered. This is particularly true if asset managers use jargon or fail to provide clear and concise explanations. This extends to understanding the value of alternative investments.

Many HNWIs also have a preference for digital experiences. This can be a challenge for asset managers who have not invested in providing a best-in-class digital experience. HNWIs also often have a strong preference for personalization. This can pose a challenge if asset managers do not have the systems and processes to provide a personalized experience.

Remedies for Client Friction

There are several remedies that asset managers can put in place to address the sources of client friction.

One remedy is to simplify product offerings. This can be done by reducing the number of products offered and making sure that the products offered are easy to understand and meet the needs of HNWIs.

Another remedy is to increase transparency around fees. This can be done by providing more information on fee structures and ensuring that all fees are disclosed upfront.

Furthermore, asset managers can improve their financial literacy training for staff. This will help ensure that staff is better equipped to explain products and services to HNWIs. In addition, asset managers can provide more support for HNWIs considering alternative investments. This can be done by offering educational resources and guiding how to select suitable investments.

To improve the digital experience, asset managers can invest in providing a best-in-class online platform. This can include features such as a personalized dashboard, mobile access, and e-statements. Finally, to improve personalization, asset managers can invest in systems and processes that allow them to provide a more tailored experience for each HNWI.

Gridline is the solution to all of these client friction issues that investors and asset managers face. Gridline is a digital wealth platform that provides a curated selection of professionally managed alternative investment funds and enables access for individual investors and their advisors to gain diversified exposure to non-public assets with lower capital minimums, lower fees, and greater liquidity.

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