The “research” that emanates from the wealth management sector has never really impressed, either in terms of the strength and depth of intellectual rigour, or the methodologies used.
Not surprisingly, findings tend to be axiomatic and usually state the obvious.
More problematically, the findings associated with a wealth management research exercise almost invariably involve predictions. These are then rarely, if ever, tested, much less critically scrutinised.
The current crop of reports on wealthy people's investment preferences appears to exemplify these trends.
Take the recently published Investing for Global Impact, a report produced by Barclays Private Bank, Campden Wealth and Global Impact Solutions.
Based on a survey of more than 300 respondents from 41 countries with average net wealth of $876 million, more than a third of the investment portfolios of the very rich will apparently consist of “impact” investments in five years' time.
Investments that focus on combating climate change and its effects together with healthcare took pride of place.
This will result in a significant reallocation of assets. For according to Investing for Global Impact, “impact” investments accounted for just 20 percent of investment portfolios in 2019.
Assume that the total wealth that could be employed by the sample surveyed in the report amounts to around $262.8 billion ($876 million times 300) and this eventuality would result in a huge reallocation of assets.
Based on ceteris paribus assumptions, $91 billion (35 percent of $262.8 billion) would therefore be devoted to “impact” investments compared to the $53 billion (20 percent of $262.8 billion) allocated in 2019.
This just scratches the surface, however. For if the report's sample really is representative of the global population of very rich investors the extra money devoted to impact investments could amount to many trillions of dollars.
But is this really likely to happen?
Notwithstanding all the usual definitional problems (what is an “impact” investment for example?) the answer is almost certainly 'no', for two important reasons.
The first, which highlights the shortcomings of these survey-based research exercises, is that respondents rarely do what they say (even if they actually had the ability to so).
“People don’t think what they feel, don’t say what they think and don’t do what they say,” as David Ogilvie, the great British advertising guru, famously pointed out.
If researchers really want to know how people behave, especially in response to various stimuli, it is far better to observe real behaviour, rather than ask the subject what they might do under certain circumstances.
The second is that although the survey respondents may have had average net wealth of $876 million, only a small portion of this would be accounted for by financial investments.
Most is held in the form of real assets, such as land, real estate and, perhaps most importantly, business enterprises.
If the rich really do want to have a bigger and more beneficial “impact” on the world than it might be far more efficacious to examine how the businesses they own and operate, perform in this respect rather than splashing out on new investments.
All of this is academic, however.
For the one thing that can be predicted with a fair degree of certainty is that the findings contained in Investing for Global Impact will, like most “research” that emanates from the wealth management sector, be forgotten in five years' time.
But will that stop researchers and their wealthy subjects from leaping on the “impact” investing bandwagon in the short term?
Of course not.
