Investor behavior has changed dramatically in light of market rebounds and signs of recovery, according to the 14th annual World Wealth Report released Tuesday by Merrill Lynch Global Wealth Management in conjunction with Capgemini.
“Investors are emerging from the financial crisis as more engaged, cautious and conservative,” said Bertrand Lavayssiere, managing director of Global Financial Services for the Capgemini Group.
This year’s report aimed to provide a comprehensive view of how wealth-management firms are adjusting to the new behavior and attitudes toward investing by high-net-worth investors.
Rather than chase performance, the study found that about 90% of investors are now remaining cautious and are easing their way into effective risk management. And they are seeking specialized advice from firms and working closely with advisors.
“The crisis hit investors at every level of wealth and impacted them on a personal and emotional level,” said Sallie Krawcheck, president of Global Wealth & Investment Management Bank of America in a press release. “Many lost incomes, saw their retirement savings shrink or tried to open a new business or take out loans but were unable to find cash.”
The report further indicated that high net worth investors’ confidence was “shaken” due to the recent economic turmoil among other factors. About 59% of investors have regained trust in their advisors, while 56 % started believing in their wealth management firm again.
In order to effectively meet the needs of the new type of investors, wealth management firms are actively seeking to incorporate emotional factors into tighter portfolio management and risk capabilities.
“Many firms are already beginning to embrace behavioral factors as part of [high net worth investors’] investing strategies and the holistic advice they provide their clients,” Krawcheck said in the release.