New York (March 5, 2004) -- When it comes to strategic financial planning tactics such as portfolio management, diversification and risk management, the country’s wealthiest individual investors are mirroring the sophisticated strategies used by large financial institutions.
According to a joint study by financial conglomerate Merrill Lynch and consulting giant Cap Gemini Ernst & Young, high net worth individuals (HNWIs) have consistently outperformed other investor segments, primarily through regular re-balancing of their portfolios, a willingness to diversify and an increasing reliance on professional advisors -- much like many of the larger financial concerns. HNWI are defined as those with assets of at least $1 million excluding primary residential real estate holdings.
The study of HNWIs’ increasing adoption of institutional investor techniques found them seeking professional advice on a diverse range of financial products and to help meet a growing need for more sophisticated planning. As an example, nearly two-thirds of HNWIs polled (64 percent) cited investment and financial risk as primary motivators for seeking professional advice. As a group, HNWIs are 15 percent more likely than other investors to seek professional advice.
Meanwhile, in a Merrill Lynch/CGE&Y survey conducted last March, 45 percent of HNWIs indicated they had existing relationships with certified financial planners, up from 30 percent the prior year.
More recently, the study said HNWIs have shifted back to equities from fixed-income securities. HNWIs are also pursuing more sophisticated investment strategies including managed accounts; real estate and real estate investment trusts; investments of "passion," i.e.: wine, art and collectibles; and alternative investments such as derivatives and hedge funds. The Merrill Lynch/Cap Gemini study is a prelude to the 2004 World Wealth Report, a market research study of wealth and behavior patters of HNWIs scheduled for release on June 15.
-- WebCPA staff
