Cautious millionaires push banks hard: report

09:32, June 24, 2010      

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Mistrust of regulators' ability to prevent another financial crisis and concerns that markets remain unstable have turned millionaires into conservative and pushy clients of wealth managers.

Nearly three-quarters of rich people around the world have not yet regained trust in financial watchdogs they believe failed to protect them against sharp losses in 2008, according to the latest Merrill Lynch-Capgemini world wealth report.

This lack of faith is preventing them from investing in higher-risk assets that could speed the recovery of their portfolios if markets remain stable, the report said. Such investing would also yield higher margins for private banks.

But rich investors are now more conservative at a younger age than they were previously.

"While ... investors were encouraged to be aggressive in the markets in their 30s, some 40-50-year-old investors have experienced a lost decade ... and are questioning whether they still have the stomach to ride out possible market swings again," the report said.

The survey provided some cheer for a wealth management industry that has struggled to rebuild its reputation after losing money for clients in 2008.

Nearly 60 percent of millionaires said they are regaining trust in their financial advisers, while 56 percent said confidence in wealth management firms has rebounded.

The wealth industry has not seen a return to business as usual, however. Millionaires are more demanding of their wealth managers since the crisis, taking a hands-on approach to their portfolios, and expect greater clarity on risk.

Rich clients also demand simpler products, more frequent updates on their portfolios, and better expertise, making trading conditions for the wealth managers tougher.

"(Rich) clients are re-evaluating their current wealth management provider relationships," the report said.

Of global assets belonging to millionaires, 31 percent were held in fixed-income instruments at the end of last year, compared with 29 percent in 2008.

Recovering stock markets caused global equity allocations to edge up to 29 percent from 25 percent.

Allocations to real estate were unchanged at 18 percent, having increased during 2008 as the rich sought "tangible assets" amid the crisis.

Money in alternative investments stood at 6 percent, down from 7 percent in 2008, with the proportion in hedge funds rising to 27 percent from 24 percent as the sector recovered. Exposure to commodities gained from investors seeking gold as a hedge against inflation.

Source: China Daily/agencies


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