High-net-worth (HNW) and ultra high-net-worth (UHNW) clients are predicted to double their portfolio allocation of life assurance products from 10% to 20% in the short term, according to research by Scorpio Partnership in collaboration with NPG Wealth Management.
The findings, drawn from The Future of Life: The anticipated role of life assurance in wealth management by NPG Wealth Management and consultancy Scorpio Partnership, are based on the views of 50 leading wealth management and life assurance professionals.
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The research indicates that the European life assurance market, which is currently made up of 700bn worth of investments, is undergoing a state of evolution as HNW and UHNW clients become more sophisticated and demand portable and tax efficient investment products for estate planning and liquidity management.
According to the findings, 70% of existing European life assurance volumes currently come from Germany, France, Italy and the UK.
Wealth professionals indicate that the potential UK opportunity for life assurance amounts to approximately 1.5bn 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 750m.
Jurisdictions like Ireland and Luxembourg are also cited as rising in popularity as the destination for assurance solutions, as HNW individuals become increasingly mobile and are accumulating a broader, complex range of assets over their wealth creation phase.
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By GlobalDataWealth professionals interviewed also indicated significant institutional benefits to life assurance products.
Specifically, NPG Wealth Management said clients investing via life assurance vehicles tend to have a 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, said NPG Wealth Management.
Marc Stevens, chief executive of NPG Wealth Management, said: "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."
