Private clients like real economy

AP Advisor Private | July 2020

34% of them are active entrepreneurs; 22% owe their fortune to the family business, of which they own a share; 16% have sold their business, while the remaining 28% have made a fortune out of their career.

On balance, almost three quarters of Private Clients (that is, clients whose financial assets exceed € 1 million) and over 90% of HNWI clients (whose financial worth surpasses € 5 million) are entrepreneurs or come from a family of entrepreneurs (source: FINER Finance Mirror).

It is therefore natural that their entrepreneurial instinct should also guide their decisions concerning investments – indeed, their desire to gain significant returns is accompanied by their wish to build or partake in an enterprise.

All this results in the high propensity of Private and, especially, HNWI clients to partake in investments in non-listed companies, or real economy.

In fact, the propensity to buy into private businesses differs among individuals depending on whether they are current or former entrepreneurs: in the first instance, the interest in shareholding is mainly subject to its relevance to one’s activity (79%) and is envisaged to a lesser extent (21%) as a simple investment.

The reluctance of current entrepreneurs comes mainly from the high-risk component associated with investments in non-listed businesses, adding to the existing risk component linked to their current entrepreneurial activity.

In other words, active entrepreneurs associate a risk component to their own business and tend therefore to compensate for it through the careful management of their personal assets.

On the other hand, former entrepreneurs who divested their business are more inclined to invest part of their assets in non-listed businesses (67%).

An ASSOGESTIONI research – “Il risparmio al servizio dell’economia reale: dai mercati quotati agli strumenti illiquidi” – carried out by FINER between February and May (which involved 1.600 end investors) highlights the interest of clients with large assets – Private and HNWI clients – in investments in real economy.

In the context of illiquid products, Private and HNWI clients show a much higher interest in investing in infrastructures (75%) than mass market clients (59%).

Such difference may be partly explained by another figure: 67% of Private and HNWI clients prefer to invest in businesses capable of generating a measurable social and environmental impact, as compared to 52% of mass market clients.

One consideration applies to all of them: today, in an age in which rates are below zero, the propensity towards investments in illiquid products intended for real economy has risen.

A higher perception of risk coexists then with the need to know the destination of the investments in order to consciously contribute to a specific project and, more generally, to the relaunch of the country.

An additional explanation comes from Maslow’s hierarchy of needs.

Those who have already had a chance to achieve success and satisfy their needs of esteem and social prestige are more inclined to take a step towards self-actualization by means of activities that are morally accepted by their social group.

Because Private and HNWI clients often anticipate the needs and attitudes of the majority, we only have to hope that investing in real economy will soon become a status symbol.

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