Wealth management can seem like a vast area filled with nuances and complexities, and certainly the waters may seem murky at times, but defining wealth management is actually very simple: a wealth management provider should consult with clients as to the options they have, recommend the best course of action to suit their goal, and then provide the appropriate financial products and services to achieve this goal.
In theory, a wealth management service can provide every financial product available, but of course in practise different companies come to specialise in different areas. Wealthy clients seek a variety of wealth management services to best suit their needs, and when choosing a service, reputation and prior track record are vital factors which are taken into consideration.
Although wealth management has always been in high demand by high net worth individuals seeking to manage their finances and expedite their financial growth, the increase in affluence globally means that the market has become oversaturated with high net worth individuals. Due to this oversaturation, it has become necessary to create a new class of individual: the ultra-high net worth individual, or “UHNWI”. To qualify as a UNHWI, you must have a net worth of over USD 30 million. Many of the wealth management services found it necessary to introduce this further separation, as they wanted to provide services to accommodate the “ultra-wealthy” in particular, and in turn, the UHNWIs themselves felt they should be differentiated as their needs differed vastly from regular old HNWIS.
So why would wealth management services want to target these UNHWIs in particular? Well, the global UHNWI population currently amounts to 187,380 individuals boasting a combined wealth of USD 25.8 trillion. Simply put, most companies, if they can choose to do so, would rather attract clients with extravagant wealth as these clients are more willing and happy to pay extravagant fees for these services. Combine this with the fact that the rate of UHNWIs is rapidly growing and therefore the demand for wealth management services targeted toward this demographic is rapidly growing also. In fact, considering that the number of UHNWI grew 0.6% in total between 2013/14, but the number of billionaires grew a staggering 9.4% during the same period, it may not be outlandish to predict the emergence of dedicated services for the “ultra-ultra-wealthy” in the near future.
Wealth management services may also target UHNWIs due to the fact that this demographic is more vulnerable to market fluctuations. Being able to predict and act in accordance with these fluctuations can be the difference between millions of dollars being gained or lost, and so seeking consultancy from wealth management services is a no-brainer for any prudent UHNWI. Many companies know this fact and therefore know there will always be a gap in the market for the services they provide. With the constant growth of UHNWIs and, at the next level up, billionaires, the gap in the market is forecasted to widen rather than shrink.
However, it is not all sunshine and rainbows for wealth management services. As the growth of the ultra-wealthy is not a closely guarded secret, the number of providers of financial products and services is also going to increase and competition in the field is fierce and only set to intensify. You want the wealthiest, most high profile clients? Well you had better be prepared to whet their appetites with an extremely dedicated, targeted and multi-national service.
There are two main philosophies that UHNWIs subscribe to: either they seek a number of financial services/products from various companies and choose the options that best suits their needs in each individual area, or alternatively, they recruit the services of one company who act as a one-stop-shop for all of their wealth management needs.
The former approach allows the UHNWI to be more specific in the exact qualities that they are seeking for each individual aspect of their wealth management and then attribute each aspect to the company or organisation which they deem most suitable. For the UHNWI willing to do their research and be meticulous in the management of their finances, this option is likely to be most appealing.
On the other hand, obviously this approach requires some time dedicated to perusing the options available and critiquing each based on its merits and shortcomings. Many UHNWI would rather do without the spent time or the headache. For these individuals, having one company take care of the entirety of their wealth management services would save them a lot of trouble. Although these individuals will not benefit from a variety of companies who possess their own unique speciality areas, they will instead gain the benefit of having their entire wealth management strategy coordinated from a single body. This ensures that each decision and each action taken by the company to protect and grow the UHNWIs assets are made in cohesion with each other and are operating under the same philosophy. It helps to avoid the cliché of having “too many cooks in the kitchen”, meaning that the UHNWI avoids having a number of wealth management companies with their own unique strategies pull them around in one hundred different directions.
An emphasis on providing financial products and services for the ultra-wealthy has become the prevailing strategy for a large number of wealth management providers, and as more HNWIs increase their net worth, the more UHNWIs are born and the higher the demand for wealth management services. Those UHNWI seeking the greatest solution for all their financial needs can either recruit the services of a number of voices providing a range of viewpoints, or they can place all their eggs in basket and entrust one company with safeguarding all their wealth management needs. As wealth in general continues to grow and the number of UHNWI increase on a global scale, so the wealth management sector must evolve in order to be able to accommodate the unique needs of these clients that arise from the economic climate in which they live and operate.