PLACE FINANCIÈRE & MARCHÉS — Assurances

Life assurance will make up a fifth of every HNWI’s portfolio by 2025



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Marc Stevens, chief executive of NPG Wealth Management (Photo: NPG Wealth Management)

Wealth professionals predict that the consumption of life assurance products among HNW and UHNW clients will double from 10% of portfolio allocation to 20% in the short term, as incoming regulations reshape the wealth structuring pool and push many other investment products out of favour.

These findings, drawn from The Future of Life: The anticipated role of life assurance in wealth management by NPG Wealth Management and Scorpio Partnership, are based on the views of 50 leading wealth management and life assurance professionals. According to the experts, 53% of anticipated growth will come from the HNW portion of the market, while 29% will be from the UHNW sector and 18% among the mass affluent.

The research indicates that the European life assurance market, which is currently made up of 700 billion euros worth of investments, is undergoing a state of evolution as HNW (high-net-worth) and UHNW (ultra-high-net-worth) clients become more sophisticated and demand portable and tax efficient investment products for estate planning and liquidity management.

Wealth professionals indicate that attractive jurisdictions like Ireland and Luxembourg are rising in popularity as the destination for assurance solutions, as HNW individuals become increasingly mobile and are accumulating a broader and more complex range of assets during their wealth creation phase.

According to the findings, 70% of existing European life assurance volumes currently come from Germany, France, Italy and the United Kingdom. Wealth professionals indicate that the potential UK opportunity for life assurance amounts to approximately 1.5 billion euros in possible new business. By contrast France, where assurance penetration as a retail product or tax wrapper is much higher, experts see the opportunity as being around 750 million euros.

Wealth professionals interviewed also indicated significant institutional benefits to life assurance products. Specifically, clients investing via life assurance vehicles tend to have relationship tenure with their private bank that is four times as long as if they were in an unwrapped product. Furthermore, the product arrangement fee can typically span between 3-6% of the total value of the premium cover, generating valuable fee income for wealth institutions.

“For many in the wealth sector, life assurance remains a product which is mired by complexity. Private banks and assurance providers must increase collaboration to fine tune internal processes and specialist knowledge in order to demonstrate the relevance of the life assurance product to the end client” commented Marc Stevens, chief executive of NPG Wealth Management. “As an industry, we must work to elucidate the benefits and value of life assurance so that we and our customers can capitalise on this increasingly desirable product.”