INVESTOR HABITS & PREFERENCES - UK/US
VIEWS From THE WealthY INVESTOR
Survey Background
This snapshot report is part of Altiant’s Category Surveys, short questionnaires submitted to our validated in-house panel of Affluent and High Net Worth Individuals, LuxuryOpinions®. This version explores UK & US Investor Habits. The aim was to assess our panel’s attitudes and behaviors and the differences between the two countries and explore differences between investors of both countries as well as between investors with different levels of assets.
The quantitative online survey for this report was carried out during May 2019, and in total interviewed 632 members from the UK and US. Subgroups were defined based on investable assets, those having between $250,000 - $1,000,000 are classified as “Emerging HNWI” and those with more than $1,000,000 are classified as High Net Worth Individuals “HNWI”.
For this report, 30% of the 632 sample was aged 18-39, while 70% was aged 40+. The gender split was 55:45% male:female and the Median Investible Assets was $1,635,294.
Please note that any overarching references to Emerging HNWIs/HNWIs refer specifically to those surveyed in this report. Comprehensive data broken out and charted by region is available on request.
Key Findings
1) There are significant differences between UK and US investor habits and portfolios. The large gaps between investment rates in Mutual Funds, Exchange Traded Funds (ETFs), Private Placements, and Municipal Bonds could potentially signal growth opportunities in the UK, or simply highlight key differences between cultures.
2) Almost 1 in 3 (29.3%) investors spend at least 10 hours researching each potential investment, with HNWIs spending more time than Emerging affluents. Investors use a wide variety of sources to guide their decisions, with financial news media (66%) and professional advisors (64%) the most influential.
3) Our affluent panel dedicate more of their money to wealth management companies as their wealth increases, rising by 65% between the Emerging and HNWI tiers in the UK, and by 36% in the US. Nevertheless, just over half of our total British sample’s wealth is managed by themselves, approximately 10% higher than the American equivalent.
INVESTMENT SELECTION FACTORS
Investors typically spend between 5-7 hours researching investments
“On average, how much research do you personally conduct prior to deciding on a particular investment?”
The median time across both countries and all investors was approximately 6 hours.
HNWIs spend on average approximately 20% more time researching investments than the lower asset band.
The UK saw the largest difference between the two asset classes, with HNWIs spending about 34% more time researching investments than their less well-off counterparts.
Base: 632 UK/US Emerging/HNWIs Source: LuxuryOpinions/AltiantDifferences in investor mindset
“Considering your attitudes towards investment, please select the option which best represents you from each of the following pairs of statements.”
Established American HNWIs are more risk-tolerant and active than our British respondents when it comes to investing.
Base: 632 UK/US Emerging/HNWIs
Source: LuxuryOpinions/AltiantMany sources influence investment decisions
“Which of the following sources typically influence you to make investment decisions?”
Base: 632 UK/US Emerging/HNWIs
Source: LuxuryOpinions/Altiant
A wide variety of sources can influence affluent people’s financial decisions. Financial news media and professional advisors account for the most important information sources in both countries. Company reports can also be a reassuring way to encourage investment with confidence.
Financial blogs remain an important influencing source factoring into about 40% of investors’ information repertoire.
While lowest on the list, about 15% of the investors interviewed are (knowingly) influenced by social media.
PORTFOLIO MANAGEMENT
Which investment vehicles are the most popular?
“Which of the following types of investments do you currently have in your portfolio?”
Publicly-traded stocks and mutual funds are the most popular investment instruments among the investors interviewed.
Large differences exist between the two countries investors in their weighting of Mutual Funds, Exchange Trade Funds (ETF’s) and Private Placements. There is scope for considerable growth in the ETF market in particular for these products to compete with similar mutual bond products (see next slides).
Corporate bonds seem to behave similarly between both markets, while Municipal bonds appear to be much more popular in US portfolios.
Base: 632 UK/US Emerging/HNWIs
Source: LuxuryOpinions/Altiant
Usage Rates of Wealth Management and Independent Financial Advisors
“Please select all of the applicable options in relation to your interaction with wealth management companies and advisors?”
Independent Financial Advisors (IFAs) have a much more important advisory role among UK investors than among US investors.
Usage rates of Wealth Management companies grow significantly as asset levels increase. Across both markets, HNWIs averaged about 75% usage, compared to only an average of 45% among our American and UK-based Emerging sample.
Base: 632 UK/US Emerging/HNWIs Source: LuxuryOpinions/Altiant
Base: 632 UK/US Emerging/HNWIs
Source: LuxuryOpinions/AltiantBrits are more likely than Americans to manage their assets themselves
“Please indicate the approximate percentage of how your investible assets are managed.”
When weighted, affluent Brits are significantly more likely than their American counterparts to manage their finances themselves, with just over half of our British sample’s wealth being self-managed.
While just over two in five of our affluent/HNWI American sample’s wealth is self-managed, wealth management companies are relied upon more in the US: just over a third of our American sample’s wealth is allocated to wealth management companies, compared to less than a fifth in the UK.
Financial allocations to Wealth Management companies increase with affluence in both countries, rising by 65% between the Emerging and HNWI tiers in the UK, and by 36% in the US. The elevated importance of wealth management in the US means that IFAs are somewhat impacted, receiving only 14% of affluent Americans’ wealth (compared to just over 20% in the UK).
Base: UK/US Emerging/HNWIs (Wealth Management n=325, IFA n=245, Yourself/Family & Friends/Others n=632)
Source: LuxuryOpinions/Altiant
FOCUS ON EXCHANGE-TRADED FUNDS (ETF)
ETF in Focus: Introduction
“What is your level of interaction with ETFs?”
Base: 632 UK/US Emerging/HNWIs
Source: LuxuryOpinions/AltiantETFs have their origins in North America and will reach 30 years’ of trading in 2020. Despite many similarities to the more mature mutual bond market, a growing number of investors are now seeing ETFs as attractive products.
Given their origins, it is unsurprising that American affluent/HNWIs are much more likely to be investors in ETFs: 59% currently doing so, more than double the number in the UK (28%).
ETF awareness is extremely high in the US, with only 4% of the sample unaware of them, compared to 20% in the UK. There are opportunities in the UK market to convert the 52% of our sample from those who are aware of ETFs but do not currently invest in them, into active investors.
ETF in Focus: AWARENESS
“When thinking about ETF’s what is the first company that comes to mind?” (top 5 unaided)
Vanguard, Blackrock and Fidelity enjoy strong top of mind awareness in both countries. The US-focused Charles Schwab also scores well in its home market.
Base: 632 UK/US Emerging/HNWIs Source: LuxuryOpinions/Altiant
ETF in Focus: TRIGGERS
“You stated that you currently invest in ETFs. Which of the following factors attract you to ETFs?”
Current ETF investors cite the ease of diversification as a main attraction for them to invest in the product. This is especially true in the US, where nearly three in five answered in this manner.
Ease of buying and selling ETFs was the only attribute to resonate with more than 50% of respondents in both markets.
However, that a number of factors achieve relatively high levels of response in both countries shows the diverse strengths of ETFs in appealing to investors.
Base: 263 UK/US Emerging/HNWIs who currently invest in ETFs Source: LuxuryOpinions/Altiant
ETF in Focus: DETERRENTS
“You stated that you are aware of ETFs but do not currently invest in them, why?”
Base: 253 UK/US Emerging/HNWIs who are aware of ETFs but do not currently invest in them. Source: LuxuryOpinions/Altiant
Among those aware of ETFs but not currently investing in them, about half cite the main reason for not doing so is the belief that higher rates of return can be achieved elsewhere.
Interestingly, just over 10% cite the difficulty in buying them as a deterrent. This somewhat contradicts the cited ease of buying seen on the previous slide, suggesting that ETF operators could make it clearer and easier for current non-buyers to engage with these products.
Among the 78 UK and US respondents who had not heard of ETFs, there is a conservative openness towards engagement. When explained, 27% say they would probably invest in ETFs while 27% were unsure/neutral. Only 16% said they were probably or definitely not likely to invest.
To view the data set in full, or speak to us about any of your luxury research requirements, please email us at contact@altiant.com
Contributors
Chris Wisson, Knowledge Director
Lars Long, Founder & CEO
Plamen Iliev, Senior Project Manager
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