Wealth Management Research Articles

Practical Applications of The Life Journey of Wealthy Women: Evolving Experiences Around Money, Work, Family, and Life Choices of Ultrawealthy Women

In <b>The Life Journey of Wealthy Women: <i>Evolving Experiences Around Money, Work, Family, and Life Choices of Ultrawealthy Women</i></b>, which appears in the Winter 2020 issue of <b><i>The Journal of Wealth Management</i></b>, authors <b>Fredda Herz Brown</b> (<b>Relative Solutions</b>) and <b>Dennis Jaffe</b> (<b>Wise Counsel Research</b>) explore the unique ways women from three different wealth origins—inherited, self-created, and through marriage—understand their affluence. Some commonalities observed include a view of wealth as a means to pursue self-actualization, upbringings that emphasized traditional views of a woman’s role, a commitment to gender parity and instilling these values in their children, and a positive relationship between wealthy women and their fathers. <b>TOPIC:</b>Wealth management

Technological Prisms: A Fuzzy-Set Analysis of Cognition, Robo-Advice, and Adaptation

Directions of attention, particularly when directed toward new technology, is a critical component of incumbents adapting to technological change; however, new technology is often ambiguous at its core, skewing the interpretations associated with attending to technological change. As a result, organizations may attend to emerging technologies, but attention may differ between organization depending on how a single technological change is interpreted. Technological changes, therefore, are analogous to prisms that emit different signals with organizations recognizing few, but not all signals. Unique interpretations by organizations subsequently impact the adoption of technology and the degree to which organizations sufficiently adapt to technological change. I study the complex combinations of attentional direction, interpretations, and technological adoption by combining the computational method of topic modeling with a fuzzy-set Qualitative Comparison Analysis to uncover unique cognitive and decision-making combinations that lead to organizational adaptation. In the context of the Canadian Wealth Management industry, I outline unique cognitive interpretations of robo-advice, a technology that automates financial advice, among 15 incumbent organizations in combination with technological adoption decisions and find 3 unique paths to adaptation. The results highlight that not all directions are of attention toward emerging technologies are fruitful for adaptation and that that organizations hold the capacity to creatively adapt in the absence of both attention and technological adoption.

ISLAMIC WEALTH MANAGEMENT: STRATEGIES IN SHARIA-BASED FINANCIAL PLANNING AND MANAGEMENT

The research aims to formulate and implement proper wealth management based on Sharia, so, it can help in achieving individual goals in financial management. Qualitative research approaches are used with consideration of low awareness in financial planning, so, it requires in-depth analysis in the formulation and implementation of sharia-based wealth management in order to be more realistic. As a form of implementation of maqasid syariah to achieve falah in the world and the hereafter. The results of this study are the utilization of Islamic wealth management on financial planning, starting from the stages of planning, implementation, supervision and evaluation of plans, to ensure the wealth will yield the benefit in the world and in the hereafter.

High net-worth attachments: emotional labour, relational work, and financial subjectivities in private wealth management

ABSTRACT Private Wealth Management (PWM) is a market providing financial services to High and Ultra High Net-Worth individuals and families. Here, efforts developed by wealth managers to attach those involved with wealth to financial instruments point to how the financial subjectivities of investor and advisor are co-enacted. So far, cultural economic literatures on the subjectivities entailed with financial markets have mostly produced separate accounts focused on financial consumers or professionals. Drawing on interviews with wealth managers in Lisbon, London, Geneva, and Zurich, this article demonstrates how investor and advisor subject positions co-materialize with the (re)reproduction of market attachments. By enriching a cultural economic heuristic of arts of attachment with insights from economic sociology, two main findings are generated. First, stabilizing customers as investors demands transmitting advice as ‘genuine’ care, rather than commercial interest; secondly, cultivating financial attachments within customers’ frames of intimate ties demands re-organizing how monetary and financial forms are imbricated with family (notably kinship) ties. These findings allow stressing how processes of financialization of wealth do not correspond to an intrinsic, natural involvement of U/HNWIs with financial markets and organizations but demand the occupation of financial subject positions that are critically involved with those of their financial services providers.

Digital innovation in wealth management landscape: the moderating role of robo advisors in behavioural biases and investment decision-making

PurposeInnovation is the way of life and we see various innovative techniques and methods being introduced in our daily life. This study aims to focus on digital innovation in the wealth management domain. This study examines the effect of usage of robo-advisory services in investment decision-making and behavioural biases, i.e. overconfidence and loss aversion. Such studies are more pronounced in developed countries and little has been studied about investor behaviour in association with advisory services in developing countries such as India.Design/methodology/approachOverconfidence and loss-aversion biases, investment decision-making and advisory services questions are measured using a five-point Likert scale. The number of respondents was 172 investors. A purposive sampling is used for gathering responses from investors. Structural equation modeling model was run using AMOS 22 version software package.FindingsThe authors found that behavioural biases positively and significantly influence the irrationalities of investment decision-making. The findings of this study also provide empirical evidence that the usage of robo-advisory services, by individual investors, is still incapable of mitigating behavioural biases, such as overconfidence bias and loss-aversion bias.Research limitations/implicationsThe sample size of this study could be a limiting factor. This study is limited only to two biases, while other behavioural biases affect the investment decision-making of the investors, which can be considered for future research along with the impact of robo-advisory services in different socio-cultural backgrounds.Practical implicationsThis study will assist fintech start-ups, banks, architecture of robo advisors, product owners and wealth management service providers improvise their products, platforms and offerings of these automated advisory services. This could help individual investors to mitigate their behavioural biases in investment decision-making.Social implicationsThis study is useful to society as the awareness of robo-advisory services is very less, at present, and there is a need to increase the usage of these services to extend the benefit of this to the lower stratum of society. These services would be useful to all investors who find it difficult to afford financial advisors and help them mitigate their behavioural biases for investment decision-making.Originality/valueThis study is the first of its type that establishes the linkage between behavioural biases, digital innovation in fintech, i.e. robo-advisory services and individual investor’s investment decision-making in individual investor of the Indian stock market.

Wealth Management Products, Banking Competition, and Stability: Evidence from China

Shadow financing through off-balance sheet wealth management products (WMPs) has become increasingly important besides deposits in China. We quantify the economic magnitude of the effect of WMPs on banking stability in an equilibrium model calibrated to Chinese banking sector data. Alternative equilibria emerge, which deviate substantially from the observed banking system and lead to severe financial distress and large welfare losses. Rollover costs from the WMP market and negative shocks to the asset market underlying WMPs can exacerbate banking instability. Moreover, we show that smaller and medium sized banks are comparably relevant for financial stability as the systemically important big 4 banks in China.

Performance Evaluation of China Internet Monetary Fund Based on Super-efficient DEA

Since 2013, China’s Internet money fund market has entered a new era. On June 17, 2013, Yu’e Bao, jointly launched by Alipay and Tianhong Fund Company, was the first to go public. In just a few short years, the Internet money fund market has developed in full swing, and Tencent, Baidu, and JD have also participated in the development of related change wealth management businesses. This article uses super-efficiency DEA to evaluate fund performance. Through the validity test of 16 sample fund products in 2019, 7 sample funds are valid according to the DEA; and 16 sample fund products in 2020 are tested for validity, 9 sample funds are valid according to the DEA. The research found that most of the Internet financial products have not yet reached their effectiveness, which is mainly reflected in the fund’s custody and management fees. There is still a lot of room for development in China’s Internet fund market.

Practical Applications of Sales Dispersion: A Robust Factor to Consider to Achieve Alpha

In <b><i>Sales Dispersion: A Robust Factor to Consider to Achieve Alpha</i></b>, from the Spring 2021 issue of <b><i>The Journal of Wealth Management</i></b>, authors <b>Andrew Cohen</b> (of <b>Old Dominion University</b>) and <b>Feng Dong</b> (of <b>Siena College</b>) examine the benefits of using sales forecast dispersion for predicting future stock performance. They hypothesize that companies with lower sales dispersion use strategies to optimize production, inventory control, and distribution channels, which eventually leads to long-term profitability. The authors find that the lower the analyst sales dispersion, the bigger the forecasting edge and the higher the probability of generating significant alpha. They conclude that sales dispersion is significantly more robust in predicting future stock performance than earnings dispersion. <b>TOPICS:</b>Performance measurement, analysis of individual factors/risk premia, wealth management

An exploration of Kazakhstan’s private foundations

Abstract This article is an introduction to private foundations in the Republic of Kazakhstan (RoK), discussing the legal prerequisites of the strong asset protection legislation that have been created. The author identifies and compares how the civil and common law (AIFC) systems are combined in a single country. Both systems and all types of private foundations are analyzed with a view to which are the more flexible and suitable for asset protection, wealth management, inheritance planning, investment and the achievement of charitable objectives. The article also examines under which regime a private foundation can provide a solid tool for wealth structuring and for the reduction of litigation risks.

Inside debt and shadow banking

This study examines the effect of inside debt arising from CEO compensation deferral policies on shadow banking. We construct a parsimonious model that shows that increased bank inside debt leads to increased shadow banking. Using a CEO compensation deferral policy imposed on the Chinese banking industry in 2010, we empirically test our theoretical prediction on the effect of inside debt on shadow banking proxied by non-principal-guaranteed wealth management products. We find that banks that adopt the CEO compensation deferral policy exhibit higher levels of shadow banking than their counterparts and that this result is not contingent on bank size or the extent of government control. Moreover, the effect of inside debt on shadow banking is stronger in banks with higher loan-to-deposit and non-performing-loan ratios and in banks with CEO turnover, suggesting that the compensation deferral policy induces CEOs, especially newly appointed CEOs, to do more shadow banking to circumvent regulations regarding the balance-sheet risk and to boost performance.

What We Do and Do Not Know About Standard Form Contracts? An Empirical Study of Wealth Management Product Contracts in China

AbstractWealth management products have been popular investment vehicles in China, and they are governed by standard form contracts. Existing studies mainly focus on the risk of such products and suggest having special laws to provide more protection for customers. Little is known about the actual contents of wealth management product contracts. Based on 66 hand-collected wealth management product contracts from major Chinese commercial banks, this article tries to explore the contractual relationship between giant banks and individual customers. It also tests the exploitation theory in a Chinese context by analysing whether the wealth management product contracts are more pro-seller or pro-buyer relative to the laws and regulations in China. Our findings reinforce the argument that standard form contracts are designed in favour of the sellers. The wealth management product contracts are tilted toward the commercial banks relative to the default rules. These contracts contain massive clauses that limit banks’ liabilities and restrict customers’ choice of conflict resolution mechanisms. However, a counter-intuitive finding is that national commercial banks provide less pro-seller terms than the local ones. We argue that the explanations for such variation in contract practices among Chinese commercial banks lie in the enforcement of relevant laws and regulations and the unique nature of national commercial banks.

ISLAMIC WEALTH MANAGEMENT DURING THE COVID-19 PANDEMIC

The coronavirus disease (COVID-19) pandemic has severe health effects and serious implications for economic. This research is a conceptual article that describes concepts and principles of Islamic wealth management (IWM), Islamic financial planning practice during Covid-19 pandemic, and Islamic social finance for reducing the pandemic effect. There are five stages in IWM that is wealth accumulation, wealth consumption, wealth purification, wealth distribution, and wealth protection. Wealth distribution such as alms, grant, and waqf are important in reducing social and economic impacts due to a pandemic. The existence of Islamic social financial institutions becomes very important to manage that fund. In other hand, practicing Islamic financial planning in household level can mitigate potential poverty in the crisis period. The financial planning manage the provision given by Allah as well which is beneficial for the life of the world and for the afterlife.

Wakaf Zurri: Instrumen Pengurusan Harta dalam Pembangunan Tamadun Islam

Zurri waqf stands as an alternative for estate planning upon the death of one’s parents. Despite having current alternative such as will writing, faraid and hibah, zurri waqf is viable as instrument to distribute wealth to the loved ones. Data given by Jabatan Ketua Pengarah Tanah dan Galian (JKPTG) in 2019 shows a total of RM60 billion of unclaimed property had been recorded. Amongst of the causes are; absence of will writing and little knowledge of wealth management from the heirs. Thus, zurri waqf stand as one mechanism which can be practiced to assist the parentless child in surviving their lifes. Therefore, the objective of this study is to identify the zurri waqf instrument as an estate planning and to identify the zurri waqf management procedures in Malaysia. This study is a qualitative nature in the form of interview and content analysis. This paper benefits readers and researchers involved in gaining more knowledge about zurri waqf as a suitable instrument for the estate planning of Muslim property such as land cultivated as agriculture and involving the participation of beneficiaries in waqf assets development that can bring significant impact in the future. In addition, the zurri waqf management procedures need to be improved in order to encourage its implementation in the future.

Are shadow banking activities always bad? Evidence from nonfinancial firms’ private equity placements

We investigate how the market evaluates nonfinancial firms that recently bought wealth management products (WMPs) when raising equity capital. Using a sample of Chinese firms, we find that the stock market reacts less positively to private equity placements (PEPs) by firms that recently purchased WMPs than to those that did not. Further analysis suggests that compared with retail investors, sophisticated (i.e., institutional and high-net-worth) investors pay a higher price for the shares of these WMP-buying firms. After PEPs, we find that the long-term operating performance and firm value of WMP-buying firms are higher than those of non-buying firms. Overall, the findings suggest that: (i) engaging in shadow banking activities (buying WMPs) does not mean a firm is inferior, and (ii) sophisticated investors are less concerned than retail investors about a firm’s shadow banking activities.

Improving Service Quality of Wealth Management Bank for High-Net-Worth Customers During COVID-19: A Fuzzy-DEMATEL Approach

The 2019–2020 COVID-19 pandemic has caused an economic turndown and high volatility in the global financial markets. Determining the factors that influence services to high-net-worth customers who typically have large investments in the financial markets is important for wealth management banks. This study constructs a hybrid approach by integrating the fuzzy logic and Decision-making Trial and Evaluation Laboratory (DEMATEL) methods to identify the most influential criteria affecting the performance of wealth management banks in Taiwan during the 2019–2020 COVID-19 pandemic. Surveys and interviews are designed using four dimensions (bank performance, service quality, customer relationship, and COVID-19) and 16 criteria for 10 banking executives using fuzzy linguistic scales, to obtain their expert opinions. The results show the order of influence as being service quality, customer relationships, bank performance, and COVID-19. The most important criteria are customized investment information (in-service quality), switching behavior (in-customer relationship), fee income (in-bank performance), and the number of confirmed cases in the top five countries affected by COVID-19. The managerial implication is that wealth management banks should focus on improving their service quality. Banks may strive to provide a wide range of customized investment information and increase customers’ usage of personalized financial products and services. The results of this study will benefit bank managers in serving high-net-worth individuals during the crisis period.

Variations in investment advice provision: A study of financial advisors of millionaire investors

Vignette methodology is used to examine how the personal characteristics of investors and financial advisors contribute to portfolio recommendations, and the judgements that advisors make about investment knowledge and control of prospective millionaire UK clients. We find that advisors use investor characteristics to make recommendations broadly in line with economic theory and regulatory requirements. However, women are judged less knowledgeable and in control of their investments than equivalent men. They also receive portfolio recommendations with slightly lower risk profiles. Portfolio recommendations vary by advisor, with experienced advisors and those with wealthier clients recommending higher risk portfolios. Unmeasured advisor variables also impact on judgements and recommendations. These findings have relevance to the wealth management industry and regulators, in focusing attention on the conscious and unconscious influences on the judgements advisors make about their clients.

Practical Applications of Target-Date Funds, Glidepaths, and Risk Aversion

In <b>Target-Date Funds, Glidepaths, and Risk Aversion</b>, from the Winter 2020 issue of <i><b>The Journal of Wealth Management</b></i>, author <b>Javier Estrada</b> (of <b>IESE Business School</b> in <b>Barcelona, Spain</b>) explores why target-date funds (TDFs) use glidepaths that reallocate assets out of high-growth investments and into capital preservation funds as individuals approach retirement. The simple answer is that people become more risk averse as they get older. But therein lies a problem: People tend to have less to invest when younger and more when older–so shifting money into low-growth investments reduces investors’ earnings potential as they accumulate more principal to invest. This may leave them with less at retirement. Whether this strategy is suitable depends on how much investors’ risk aversion really increases with age. Estrada investigates how much risk aversion would have to increase to match the risk reduction implemented by a popular TDF that starts off with a 90%/10% stock/bond allocation and ends up at 50%/50% at retirement. Using statistical analysis, Estrada determines that risk aversion would have to more than double during the last 25 years of working life to match the glidepath. Financial advisors may wish to take these findings into account in discussions with clients. <b>TOPICS:</b>Equity portfolio management, retirement, wealth management, risk management

Understanding FinTech Platform Adoption: Impacts of Perceived Value and Perceived Risk

FinTech platforms are one of the most important elements in the rapidly digitized world’s economy. This study investigates the factors that affected individuals’ acceptance of FinTech services, especially on internet wealth management platforms. The current research extends the unified theory of acceptance and use of technology (UTAUT) published by MIS Quarterly with integrated financial consumption attributes (i.e., perceived value and perceived risk) alongside the core construct of UTAUT. Data were collected from an established survey company. The empirical results indicate that perceived value, perceived risk, and social influence are strongly related to individuals’ FinTech adoption intention, whereas performance expectancy, effort expectancy, and perceived risk affect individuals’ perceived value, which in turn influences adoption intention. The proposed FinTech adoption model could contribute to information technology (IT) adoption research by extending the UTAUT in which individuals’ performance expectancy and effort expectancy affect their adoption intention indirectly through perceived value. Finally, the implications of the proposed new model for future research and FinTech practice are discussed.

Factors Contributing to Financial Well-Being among Black and Hispanic Women

This article provides an in-depth examination of the financial well-being of Black and Hispanic women and the factors contributing to that well-being, using the 2018 survey wave of the National Financial Capability Study. The article documents meaningful differences between Black and Hispanic women versus White women; the former are more likely to face economic challenges that depress financial well-being. Controlling for differences in sociodemographic characteristics, important dissimilarities distinguish the factors that contribute to financial well-being for Black and Hispanic women compared to White women—including the distinct impacts of education, family structure, employment, and financial literacy. The results imply that extant financial education programs inadequately address the needs of Black and Hispanic women. <b>TOPICS:</b>Wealth management, legal/regulatory/public policy <b>Key Findings</b> ▪ We explore the factors shaping financial well-being with a special focus on Black and Hispanic women between the ages of 22 and 60, in the 2018 National Financial Capability Study. ▪ Differences in demographic factors contribute to FWB across race and ethnicity, including education, family structure, employment, and financial literacy, provide insight into why subjective FWB scores do not appear to differ across race and ethnicity, despite objective measures, such as borrowing behavior, indicating strong differences. ▪ Our findings lead us to conclude that a “one size fits all” approach is unlikely to address differences in financial well-being across the board and, in particular, across sub-groups of women.

Criteria affecting Taiwan wealth management banks in serving high-net-worth individuals during COVID-19: a DEMATEL approach

Wealth management services for high-net-worth individuals in Taiwan have grown rapidly over the last decade. This study used a decision-making trial and evaluation laboratory approach to identify the criteria affecting the performance of Taiwan wealth management banks during the coronavirus disease (COVID-19) period. This research surveyed 17 executives from Taiwanese banks using 13 criteria covering three dimensions: bank performance, professionalism, and customer relationship. The results indicated that customer relationship and professionalism have an influence on key performance. Customer involvement (in customer relationship), innovative products and services (in professionalism), and customer satisfaction (in key performance) are the most influential criteria. The results suggest that banks can attract and retain customers by increasing their uses of products and services, developing innovative products, and improving customer satisfaction despite the negative effect of COVID-19. The findings of this study benefit wealth management bank managers in sustaining fee and commission income from high-net-worth customers in the midst of adverse social and economic events.