Wealth management

Last updated

Wealth management (WM) or wealth management advisory (WMA) is an investment advisory service that provides financial management and wealth advisory services to a wide array of clients ranging from affluent to high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals and families. It is a discipline which incorporates structuring and planning wealth to assist in growing, preserving, and protecting wealth, whilst passing it onto the family in a tax-efficient manner and in accordance with their wishes. Wealth management brings together tax planning, wealth protection, estate planning, succession planning, and family governance.

Contents

Private wealth management

Private wealth management is sought by high-net-worth investors. Generally, this includes advice on the use of various estate planning vehicles, business-succession or stock-option planning, and the occasional use of hedging derivatives for large blocks of stock.

A wealth management consultation Wealth Management Consultation.jpg
A wealth management consultation

Traditionally, the wealthiest retail clients of investment firms demanded a greater level of service, product offering and sales personnel than that received by average clients. With an increase in the number of affluent investors in recent years, [1] there has been an increasing demand for sophisticated financial solutions and expertise throughout the world.

The CFA Institute curriculum on private-wealth management indicates that two primary factors distinguish the issues facing individual investors from those facing institutions:

  1. Time horizons differ. Individuals face a finite life as compared to the theoretically/potentially infinite life of institutions. This fact requires strategies for transferring assets at the end of an individual's life. These transfers are subject to laws and regulations that vary by locality and therefore the strategies available to address this situation vary. This is commonly known as accumulation and decumulation.
  2. Individuals are more likely to face a variety of taxes on investment returns that vary by locality. Portfolio investment techniques that provide individuals with after tax returns that meet their objectives must address such taxes.

The term "wealth management" occurs at least as early as 1933. [2] It came into more general use in the elite retail (or "Private Client") divisions of firms such as Goldman Sachs or Morgan Stanley (before the Dean Witter Reynolds merger of 1997), to distinguish those divisions' services from mass-market offerings, but has since spread throughout the financial-services industry. Family offices that had formerly served just one family opened their doors to other families, and the term Multi-family office was coined. Accounting firms and investment advisory boutiques created multi-family offices as well.

Certain larger firms (UBS, Morgan Stanley and Merrill Lynch) have "tiered" their platforms – with separate branch systems and advisor-training programs, distinguishing "Private Wealth Management" from "Wealth Management", with the latter term denoting the same type of services but with a lower degree of customization and delivered to mass affluent clients. At Morgan Stanley, the "Private Wealth Management" retail division focuses on serving clients with greater than $20 million in investment assets while "Global Wealth Management" focuses on accounts smaller than $10 million.

In the late 1980s, private banks and brokerage firms began to offer seminars and client events designed to showcase the expertise and capabilities of the sponsoring firm. Within a few years a new business model emerged – Family Office Exchange in 1990, the Institute for Private Investors in 1991, and CCC Alliance in 1995. These companies aimed to offer an online community as well as a network of peers for ultra high-net-worth individuals and their families. These entities have grown since the 1990s, with total IT spending (for example) by the global wealth management industry predicted to reach $35bn by 2016, including heavy investment in digital channels. [3]

Wealth management can be provided by large corporate entities, independent financial advisers or multi-licensed portfolio managers who design services to focus on high-net-worth clients. Large banks and large brokerage houses create segmentation marketing-strategies to sell both proprietary and non-proprietary products and services to investors designated as potential high-net-worth clients. Independent wealth-managers use their experience in estate planning, risk management, and their affiliations with tax and legal specialists, to manage the diverse holdings of high-net-worth clients. Banks and brokerage firms use advisory talent-pools to aggregate these same services.

The Great Recession of the late 2000s caused investors to address concerns within their portfolios. [4] For this reason wealth managers have been advised that clients have a greater need to understand, access, and communicate with advisers about their situation. [5]

Life goals

As awareness of wealth management has become more common, some companies have shifted towards a model which asks clients about life goals, [6] working environments, and spending patterns as a way to increase communication. [7] The industry-recognized wealth management was more than an investment advisory discipline. [8] In 2015, United Capital rebranded their wealth management services using the term "financial life management", which, according to the company, was intended to more clearly define the difference between wealth management companies and more affordable brokerage firms. [9] The same year Merrill Lynch began a program, Merrill Lynch Clear, which asks investors to describe life goals, and includes an educational program for clients' children. [7] For clients looking to leverage their wealth for the sake of achieving philanthropical and charitable goals, social finance investments may be included. [10]

Private banking and wealth management rankings

According to Euromoney's annual Private banking and wealth management ranking 2013, which consider (amongst other factors) assets under management, net income and net new assets, global private banking assets under management grew just 10.8%YoY (compared with 16.7% ten years ago). [11]

The largest private banks and wealth managers in the world as of 2018 are as follows: [12]

RankCompanyHeadquarterAssets under management
1 UBS Flag of Switzerland (Pantone).svg   Switzerland $2,403 billion
2 Bank of America Merrill Lynch Flag of the United States.svg  United States $1,080 billion
3 Morgan Stanley Flag of the United States.svg  United States $1,045 billion
4 Credit Suisse Flag of Switzerland (Pantone).svg   Switzerland $792 billion
5 J.P.Morgan Private Bank Flag of the United States.svg  United States $526 billion
6 Citi Private Bank Flag of the United States.svg  United States $460 billion
7 BNP Paribas Flag of France.svg  France $436.7 billion
8 Goldman Sachs Flag of the United States.svg  United States $394.3 billion
9 Julius Baer Flag of Switzerland (Pantone).svg   Switzerland $388.3 billion
10 China Merchants Bank Flag of the People's Republic of China.svg  China $292.8 billion

See also

Related Research Articles

<span class="mw-page-title-main">Financial services</span> Economic service provided by the finance industry

Financial services are economic services tied to finance provided by financial institutions. Financial services encompass a broad range of service sector activities, especially as concerns financial management and consumer finance.

Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institutions, such as insurance companies, pension funds, corporations, charities, educational establishments, or private investors, either directly via investment contracts/mandates or via collective investment schemes like mutual funds, exchange-traded funds, or REITs.

<span class="mw-page-title-main">AllianceBernstein</span> American asset management firm

AllianceBernstein Holding L.P.(AB) is a global asset management firm providing investment management and research services worldwide to institutional, high-net-worth and retail investors.

<span class="mw-page-title-main">Ameriprise Financial</span> Financial services company

Ameriprise Financial, Inc. is a diversified financial services company and bank holding company incorporated in Delaware and headquartered in Minneapolis, Minnesota. It provides financial planning products and services, including wealth management, asset management, insurance, annuities, and estate planning.

<span class="mw-page-title-main">Private banking</span> Special banking for rich people

Private banking is a general description for banking, investment and other financial services provided by banks and financial institutions primarily serving high-net-worth individuals (HNWIs) – those with very high income and/or substantial assets. Private banking is presented by those who provide such services as an exclusive subset of wealth management services, provided to particularly affluent clients. The term "private" refers to customer service rendered on a more personal basis than in mass-market retail banking, usually provided via dedicated bank advisers. It has typically consisted of banking services, discretionary asset management, brokerage, limited tax advisory services and some basic concierge services, typically offered through a gateway provided by a single designated relationship manager.

<span class="mw-page-title-main">Northern Trust</span> American financial services company

Northern Trust Corporation is an American financial services company headquartered in Chicago, Illinois that caters to corporations, institutional investors, and ultra high net worth individuals. Northern Trust is one of the largest banking institutions in the United States and one of the oldest banks in continuous operation. As of June 30, 2022, it had $1.7 trillion in assets under management and $17 trillion in assets under custody. Northern Trust Corporation is incorporated in Delaware.

<span class="mw-page-title-main">Family office</span> Family controlled investment group

A family office is a privately held company that handles investment management and wealth management for a wealthy family, generally one with at least $50–100 million in investable assets, with the goal being to effectively grow and transfer wealth across generations. The company's financial capital is the family's own wealth.

EFG Hermes Holding S.A.E. is an Egyptian financial services company present in the Middle East, North Africa, Sub-Saharan Africa, and South Asia regions and specializes in securities brokerage, asset management, investment banking, private equity and research in addition to finance lease, factoring, microfinance, Financial technology, mortgage, and insurance. EFG Hermes serves a range of clients including sovereign wealth funds, endowments, corporations, financial institutions, high-net-worth clients and individual customers. EFG Hermes is listed on the Egyptian Exchange (EGX) and London (LSE) stock exchanges. EFG Hermes has offices in Egypt, the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA), Pakistan, Oman, Kuwait, Jordan, Kenya, Nigeria, UK, United States and Bangladesh with over 4,500 people from 25 nationalities. They serve clients from the Middle East, North Africa, Europe and the United States. Currently, EFG Holding is listed as number 13 in Forbes' Top 50 Listed Companies in Egypt 2023.

A multi-family office (MFO) is an independent organization that supports multiple families to manage their entire wealth. Multi-family offices typically provide a variety of services including tax and estate planning, risk management, objective financial counsel, trusteeship, lifestyle management, coordination of professionals, investment advice, and philanthropic foundation management. Some multi-family offices are also known to offer personal services such as managing household staff and making travel arrangements. Because the customized services offered by a multi-family office can be costly, clients of a multi-family office typically have a net worth in excess of $50 million.

Harris myCFO is the American wealth management unit of BMO Harris Bank serving high-net-worth individuals and families. In 2002, Harris acquired certain assets of myCFO, Inc., founded by James H. Clark, in a $30 million deal. Harris myCFO provides a variety of services including investment advisory and family office services. Harris myCFO managed over $18 billion in assets in 2011 and Forbes ranked the company seventh on a list of top fee-only investment advisors.

<span class="mw-page-title-main">Baird (investment bank)</span> American investment firm

Robert W. Baird & Co. is an American multinational independent investment firm and financial services company. It is the principal U.S. operating subsidiary of Baird, an international, employee-owned financial services firm providing investment banking, capital markets, private equity, wealth management, and asset management services to individuals, corporations, institutional investors, and municipalities.

In the investment management industry, a separately managed account (SMA) is any of several different types of investment accounts. For example, an SMA may be an individual managed investment account; these are often offered by a brokerage firm through one of their brokers or financial consultants and managed by independent investment management firms ; they have varying fee structures. These particular types of SMAs may be called "wrap fee" or "dual contract" accounts, depending on their structure. There is no official designation for the SMA, but there are common characteristics that are represented in many types of SMA programs. These characteristics include an open structure or flexible investment security choices; multiple money managers; and a customized investment portfolio formulated for a client's specific investment objectives or desired restrictions.

Jadwa Investment is the premier investment management and advisory firm in Saudi Arabia and the wider region. Headquartered in Riyadh with three regional offices, the firm has over SAR 70 billion in client assets under management and advisement. Its clients include government entities, local and international institutional investors, leading family offices, and high net-worth individuals.

<span class="mw-page-title-main">UBS</span> Multinational investment bank headquartered in Switzerland

UBS Group AG is a multinational investment bank and financial services company founded and based in Switzerland. Headquartered in Zürich, it maintains a presence in all major financial centres as the largest Swiss banking institution and the largest private bank in the world. UBS client services are known for their strict bank–client confidentiality and culture of banking secrecy. Because of the bank's large positions in the Americas, EMEA, and Asia Pacific markets, the Financial Stability Board considers it a global systemically important bank.

Guardian Capital Group, founded in 1962, operates several fully owned subsidiaries whose operations are to provide investment management services, financial advisory services, retail distribution of mutual funds, insurance, and general corporate services. Guardian Capital Group is headquartered in Toronto, Ontario, Canada, and became publicly listed on the Toronto Stock Exchange in 1969. As of December 31, 2015, the company has $24.2 billion in assets under management.

<span class="mw-page-title-main">Merrill Edge</span> Electronic trading platform provided by BofA Securities

Merrill Edge is an electronic trading platform and investment advisory service that provides self-directed and guided investment options for individuals and businesses. It is a subsidiary of Bank of America and was launched in 2010 after the merger between Merrill Lynch and Bank of America. Merrill Edge offers a wide range of investment products, including stocks, bonds, exchange-traded funds (ETFs), margin lending, mutual funds, and options.

TwinFocus Capital Partners LLC is a multi family office based in Boston, Massachusetts. The company was started in 2006 by twin brothers Paul and Wesley Karger. Today, TwinFocus has a 25-person team and represents more than 40 family office clients around the world with balance sheets totaling at least $100 million. The company manages an array of asset classes including stocks, bonds, mutual funds, private equity and real estate. As of September 2020, TwinFocus reported $7.5 billion in assets under advisory. Roughly 70 percent of the capital that the firm oversees is for U.S.-based families.

<span class="mw-page-title-main">Citibank International Personal Bank Singapore</span> Business unit of Citibank Singapore

Citibank International Personal Bank (IPB) Singapore is a business unit of Citibank Singapore that specializes in offshore investment and wealth management products and services to high-net-worth individuals residing outside of Singapore. It has 5 booking centers around the world in London, Jersey, Singapore, Hong Kong and the United States. As of 2018, IPB global had a base of about 260,000 clients and managed assets of more than US$60 billion.

<span class="mw-page-title-main">CI Financial</span> Largest investment management firm by assets under management in Canada

CI Financial is the largest investment management firm by assets under management in Canada. Based in Toronto, Ontario, it offers investment management and wealth management services targeted to high net worth retail investors, as well as brokerage and trading services to portfolio managers and institutional investors. It is considered one of the Big Three investment management companies in Canada, along with Mackenzie Investments and Fiera Capital.

<span class="mw-page-title-main">Rockefeller Capital Management</span> American wealth and asset management company

Rockefeller Capital Management (RCM) is an independent wealth management and financial services firm, founded in 2018. The firm offers family office, asset management, and strategic advisory services to high-net-worth individuals and families, institutions, and corporations. Its president and CEO is Greg Fleming.

References

  1. ↑ David Teather. Richlists. The Guardian. 25 June 2008.
  2. ↑ Fowler, William Franklin (1933). Fishermen and fish: A sequel to For America, an interpretation and plan. Lynbrook, N.Y: W.F. Fowler. p. 38. Retrieved 2013-01-30. To the inefficiency of political control of government, which is the principal cause of unsound conditions, they would grant the additional authority and responsibility of wealth management.
  3. ↑ Wealth Management Technology Spending Through 2016 (July 2012)
  4. ↑ Yeh, C: "Investors Challenge Market 'Truths'", CFA Institute Private Wealth Management, August 2009.
  5. ↑ Costa, L: "Questions Replace Investment 'Truths': A Comment", CFA Institute Private Wealth Management, May 2009. Quote:"This state of affairs poses a dilemma for wealth managers, who, for a generation, have adhered to the core principles of asset allocation and earned their keep by preaching the mantras of 'buy and hold', 'invest for the long term', and when things get tough, 'stay the course'."
  6. ↑ "How can "goals-based" wealth management prepare me for different life stages? - Worth". Worth.
  7. 1 2 Sullivan, Paul (March 20, 2015). "Financial advisers seek to inject a more human element". The New York Times. Retrieved September 17, 2015.
  8. ↑ Welch, Scott, "Perspectives on Serving the Ultra-High-Net Space An Interview with Jean L.P. Brunel and Charlotte Beyer" IMCA Wealth Management Monitor, Jan/Feb 2016
  9. ↑ Gil Weinreich (March 25, 2015). "United Capital's Duran: Wealth management is dead. Long live life management!". ThinkAdvisor. ALM . Retrieved September 17, 2015.
  10. ↑ "Wealth Management: The rise of social impact investing". Deloitte. 11 January 2022. Retrieved 15 March 2023.
  11. ↑ Annual private banking industry assets under management
  12. ↑ "The 15 biggest wealth managers in the world". Business Insider. Retrieved June 1, 2018.

Further reading

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.