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Cerulli’s report

Nearly 30% of U.S. HNW Investors Define Themselves As Self-Directed Investors

Nearly 30% of U.S. HNW Investors Define Themselves As Self-Directed Investors
  • According to Cerulli's research, more than half of high-net-worth investors have direct or online trading account balances between $500,000 and $1 million
  • "The self-directed model becomes less favorable relative to other advice models as assets increase"
  • "High-net-worth and ultra-high-net-worth clients that are using a self-directed model represent a significant opportunity for asset managers that pass due diligence screenings"
By Funds Society

Global analytics firm Cerulli Associates finds that nearly 30% of high-net-worth investors in the United States define themselves as self-directed investors, according to their High-Net-Worth and Ultra-High-Net-Worth Markets 2014: Addressing the Unique Needs of Wealthy Families report.

In the report, Cerulli analyzes the U.S. high-net-worth (HNW) (investable assets greater than $5 million) and ultra-high-net-worth (UHNW) (investable assets greater than $20 million) marketplaces. The report focuses on the three constituencies of investors, providers, and asset managers.

"This helps explain the dispersion of assets among providers, and although the direct channel's surge in the high-net-worth marketshare gains have stemmed in more recent years, providers continue to boost their high-net-worth capabilities and presence among younger, tech-savvy wealth creators," states Donnie Ethier, associate director at Cerulli. "For wealth managers, they represent increasingly worthy competitors that will likely test traditional managers' willingness, and aptitude, to adapt to next-generation investors."

The immense balances that many of these investors have within their self-directed accounts are further proof. This also helps explain where assets have flowed as investors have expanded their provider relationships. According to Cerulli's research, more than half of high-net-worth investors have direct or online trading account balances between $500,000 and $1 million.

"The self-directed model becomes less favorable relative to other advice models as assets increase," Ethier explains. "Logically, as assets increase, so does the complexity of portfolios, lending more credence to taking on an external advice sources and provider relationships. In addition to dealing with complex portfolios, advisors are an added expenditure, which can explain their lower use among retail clients."

"High-net-worth and ultra-high-net-worth clients that are using a self-directed model represent a significant opportunity for asset managers that pass due diligence screenings. In the end, direct providers are yet another avenue for external managers to reach the pool of high-net-worth assets," Ethier continues.

Opportunities to capture additional walletshare of these investors certainly exists for wealth managers and their advisorforces, although they should know going in that many high-net-worth investors use direct accounts to test their own investment ideas, provide liquidity, and even to shelter assets from their primary advisors.

 

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