Volatility Reduction: A Big Need of HNWIs & an Opportunity for Advisors

“High Net Worth Individuals currently hold less than one-third of their financial wealth with wealth managers” says the newly released World Wealth Report from Capgemini. The report goes on to say that one of the most unexpected trends of the last 20 years has been the “persistently high levels of cash held by HNWIs. Despite overall strong stock market performance around the globe, HNWIs have continued to hold almost a quarter of their financial wealth in cash, an allocation they perceive as necessary…to protect against market volatility.”

Cash that earns nothing (or a negative yield in some countries) is a huge drag on real wealth creation even in a low inflation environment. Shifting that cash into even low return asset classes, or strategies while managing total portfolio risk, at least gives investors a chance to maintain purchasing power and hopefully some growth as well.