The future of wealth: Understanding the experienced investor

Our latest sponsored research explores the dynamics of the wealth industry today – and delivers some real-world insights that will shape key wealth trends in 2024 and beyond. In this second insight in the series, we look specifically at the experienced investor.

• In late 2023, LSEG sponsored detailed research to better understand changing preferences and emerging trends within the wealth industry.
• We asked investors across the globe about how changes in the wealth industry are impacting them.
  
• This insight looks specifically at experienced investors’ preferences and satisfaction levels. 
  

Conducted by ThoughtLab, the research included two global surveys, one of 2,000 investors across countries, wealth levels, ages, lifestyles, occupations, genders and other characteristics, and the second of senior executives at 250 investment providers.

Some key areas probed included: how the role of financial advice is evolving; the impact of experience on investor behaviour; attitudes towards and adoption of AI in investment; and gaps in the sustainable investment space.

In this, the second in this series that explores the evolution of the wealth industry – and the impact of this evolution on advisors, investors, wealth firms, brokerages, and other industry stakeholders – we focus on the experienced investor and explore the responses provided by those with substantial experience in the wealth space.     

Five important headline findings revealed by our research include:

1. Experienced investors appear to diversify their providers significantly

43% of those with more than 25 years' experience have more than five providers. This percentage drops to 32% for those with 11 – 25 years' experience, 21% for those with 6 – 10 years’ experience and 9% for those with up to 5 years’ experience.

2. Experienced investors are generally happy with their existing provider arrangements

60% of those with more than 25 years' experience are happy to keep the same number of providers in the future, against 48% of those with 11 – 25 years’ experience, 43% of those with 6 – 10 years’ experience and 36% of those with up to 5 years’ experience.

3. Time investing appears to result in a more satisfied view of portfolio performance

66% of investors with more than 25 years’ experience are either “very” or “somewhat” satisfied with their investment portfolio performance in the 12 months preceding the survey. These investors are also significantly less concerned than others about market volatility.

4. Time investing doesn’t necessarily drive strong provider loyalty:

30% of investors with more than 25 years’ experience have switched providers in the last three years and 33% are considering switching in the next three years. That said, higher percentages of those in the two categories spanning 6 – 25 years’ experience have switched in the last three years and higher percentages across all levels of experience are considering switching in the next three years.

5. Factors driving the selection of providers differ with experience:

64% of those with up to 5 years’ experience selected digital apps, channels, tools and platforms as the most important factors when selecting investment providers, compared to just 23% of those with more than 25 years’ experience. “Lower fees and simple fee structure” was selected by 65% of those with up to 5 years’ experience, compared to 48% of those with more than 25 years’ experience. In addition, investors with over 25 years’ experience have more diversified selection factors with no significant spikes in the data, suggesting that they seem to be more individual in their preferences.

Let’s take a closer look at these key take-aways and unpack what these insights mean for wealth industry players.

Our key findings suggest that many of those with the most investment experience appreciate the value of diversifying their provider base. Not only do 43% of those with substantial experience have more than five providers, but large numbers of these investors are happy with their current arrangements and plan to keep the same number of advisors going forward.

This is partly linked to satisfaction levels: with two thirds of these investors expressing satisfaction with their investment performance, it stands to reason that many do not see the need to change the status quo. These investors are also less concerned with market volatility, which suggests that they appreciate the importance of taking a long-term view when it comes to wealth creation.

This presents providers with an opportunity to build long term relationships with their clients and provide a solid foundation that is based on trust and can sustain the relationship through periods of market uncertainty and volatility.       

That said, our findings also show that loyalty is not predicated on investing experience. High percentages of investors are considering switching, and this means that providers cannot take loyalty for granted. They must continually strive to create relationships that add tangible value for clients.

Finally, when it comes to digital access, it is unsurprising that digital channels and tools are perceived as more important by those with less than five years’ experience, as this directly correlates with a younger age bracket. Nonetheless, nearly a quarter (23%) of experienced investors also value digital access and this supports our view that hybrid investment models that involve a combination of human and digital input will gain traction going forward.

Once again, this presents an opportunity for both advisors and those catering to the self-directed market to keep abreast of a rapidly evolving digital space and continually offer the leading digital tools and trusted data that increasingly define the wealth space.

The research covered four regions – Asia Pacific, Europe, the Middle East, and North America. By wealth level, the largest shares comprised mass affluent (25%) and high net worth (25%), followed by very high net worth (18%). By age, the largest share consisted of Gen X (31%), followed by Baby Boomers (30%).

The study also included a benchmarking survey of senior executives from a cross section of 250 wealth management firms, from independent wealth advisors and private banks to wealth management divisions within regional and international banks.