Wealth Management - US

Wealth Management - US

The high net worth market remains as attractive as ever, but is difficult to define, as lines are blurred among the types of money management firms. Major themes in this report include:

The rich are getting richer, and the wealth market is projected to grow considerably over the next five years

Individuals at all wealth levels tend to consider themselves financially savvy—only about a third to half of millionaires have a financial advisor

Money management firms are extending their reach, catering to a broader based clientele, but may be sacrificing distinctiveness in the marketplace

Across all wealth levels, banks are a preferred place for doing business

New wealth markets, including women and Hispanics, offer considerable opportunity but must be approached with highly customized offerings

In this report, Mintel examines current trends and opportunities for firms and financial advisors servicing affluent, high net worth and ultra high net worth individuals. The report provides an overview of how firms are approaching this market and what factors are important to investors when selecting a firm. Also extensively analyzed are consumer attitudes toward financial institutions and their preferences among various types of firms, shedding light on how consumers differentiate among different organizations.  
 

SCOPE AND THEMES

What you need to know

Scope of this report

Abbreviations and terms

Abbreviations

Terms

EXECUTIVE SUMMARY

MAJOR INDUSTRY TRENDS AND RECOMMENDATIONS

Financial firms need to seek differentiation

Distribution planning

Consumers want to diversify investments—not consolidate

The newest high net worth groups to pursue—Hispanics and women

Consumer perceptions of financial institutions

INDUSTRY OVERVIEW

MARKET DRIVERS

Wealthy investors have increased access to financial information

Figure 1: proportion of respondents who believe they are very good at managing money, September 2007

Need for retirement planning

Figure 2: Percentage of clients’ assets controlled by financial planner, before and after discussion of retirement

planning, 2007

Competition for capturing asset transfers and rollovers continues to grow

Figure 3: How pre-retirees and retirees communicate with financial institutions, 2007

New wealth markets - wealthy Hispanics

New wealth markets - wealthy women

Figure 4: Source of wealth for women, 2007

Figure 5: Top characteristics sought in a wealth advisor by women, 2007

Figure 6: Individuals with whom women have discussed wealth and wealth transfer, 2007

How are the wealthy planning their legacies

Figure 7: Prevalence of wealthy investors having wills, by age segment, January 2007

Figure 8: How inheritance was typically spent by wealthy investors (multiple responses allowed), January 2007

Legacy planning for business owners

Heavy competition in the media

The wealthy and education

MARKET SIZE

Size of the global wealth market

Figure 9: Millionaire households: The top five countries, 2006

Size of the U.S. wealth market

Figure 10: U.S. household wealth, 2007

Figure 11: Number of millionaire households 2001-06

Figure 12: Counties with the most millionaire households, 2006

Employment status of wealthy investors

Figure 13: Retirement status of millionaires, January 2007

THE WEALTH MANAGERS

Who is managing global wealth

Figure 14: Top 10 global wealth managers, 2007

Who is managing U.S. wealth

Figure 15: Top 25 wealth managers in the U.S., 2007

What are the wealthy investing in

Different levels of wealth: different levels of interest in specific investments

Figure 16: Level of interest among wealthy investors in certain investments, by investable assets, 2007

Where do the wealthy get financial information

Figure 17: Percent of millionaires consulting source for investment information, January 2007

Risk tolerance among wealthy investors

Figure 18: Risk tolerance total market and by investable assets, January 2007

Overall Investment strategies of wealthy investors

Figure 19: Portfolio asset allocation of wealthy investors, January 2007

Differences in investment strategies among wealthy investors: impact of age and level of wealth

Figure 20: Investment strategy, January 2007

Investment goals: do they differ by age

Figure 21: Percentage citing top investment goal, by age, January 2007

Investment in alternatives: Which investors are interested

Figure 22: Current use of alternative investments, by type of wealth management firm, 2007

Figure 23: Why alternatives are being used or considered, 2007

Investment in separate accounts

Figure 24: Net cash flow comparison separate accounts vs. mutual fund advisory, Q3 2006-Q2 2007

What are the preferred provider channels for wealthy investors

Figure 25: Primary provider channel (company with largest portion of investments), January 2007

Figure 26: Preferred investment providers, by age, September 2007

Figure 27: Preferred retirement savings providers, September 2007

What factors influence the choice of primary providers among wealthy investors

Figure 28: Top reasons for beginning relationship with primary provider, January 2007

What financial events have impacted wealthy investors lately

Figure 29: Top financial events in the past year, January 2007

COMPETITIVE LANDSCAPE—THE CUSTOMERS

Distinguishing characteristics of the “Ultra” wealthy

North American Ultra Affluent:

European Ultra Affluent:

Latin American Ultra Affluent:

Middle Eastern Ultra Affluent:

Asia Pacific Ultra Affluent:

COMPETITIVE LANDSCAPE—INSTITUTIONAL PRODUCTS AND SERVICES

What wealth management firms currently provide and plan to provide

Figure 30: Non-investment financial services currently provided/will be providing in three years, 2007

Emergence of new retirement-oriented products

Developments in Separately Managed Accounts

Developments in Unified Managed Accounts

COMPETITIVE LANDSCAPE—RIAS, FINANCIAL PLANNERS AND BROKERS

Developments among Registered Investment Advisors (RIAs)

Figure 31: Client selection considerations, top RIA firms, top small firms vs. all small firms, 2007

Figure 32: Time spent with clients, top firms vs. all firms, 2007

Use of advisors and financial planners

Figure 33: Top five financial decisions, rated very important, 2007

Figure 34: Top three reasons for using a financial planner

Figure 35: Top three reasons for not using a financial planner

Figure 36: Orientation toward advice, 2005 and 2006

Figure 37: Primary advisor for investments, 2005 and 2006

Figure 38: Types of advice received in past 12 months, 2005 and 2006

Use of brokers

Figure 39: Type of financial institution respondents prefer, September 2007

Figure 40: Preferred provider for retirement savings, 2007

FINANCIAL FIRMS NEED TO DIFFERENTIATE

Are banks, brokerage firms, and mutual fund companies all alike

Figure 41: Preferred HNW financial institution, by gender, September 2007

Figure 42: Degree of differentiation between financial institutions, September 2007

Figure 43: Degree of differentiation between financial institutions, September 2007

Figure 44 Degree of differentiation between financial institutions, September 2007

Are banks, brokerage firms, and mutual fund companies all alike —by race/ethnicity

Figure 45: Differentiation between financial institutions, by race/ethnicity, September 2007

INVESTOR PREFERENCES: WHERE TO INVEST

Earned money

Figure 46: Financial Institution at which respondents would rather invest their money, September 2007

Figure 47: Financial Institution at which respondents would rather invest their money, September 2007

Retirement savings

Figure 48: Financial Institution at which respondents would rather invest their retirement savings, by gender,

September 2007

Figure 49: Financial Institution at which respondents would rather invest their retirement savings, by income,

September 2007

Savings accounts vs. investment accounts

Figure 50: Financial Institution at which respondents would rather invest their standard savings, by gender,

September 2007

Banks still get the checking accounts

Figure 51: Preferences for transactions accounts, by gender, September 2007

Figure 52: Preferences for transactions accounts, by age, September 2007

Large sums and inheritance

Figure 53: Preferred institution for inherited money, by gender, September 2007

Figure 54: Preferred institution for inherited money, by age, September 2007

Figure 55: Preferred institution for inherited money, by income, September 2007

Is there a difference in trust between independent advisors and banks/brokerage firms

Figure 56: Trust in advisors vs. banks and brokerage firms, all respondents with any amount of assets, by

gender, September 2007

Figure 57: Trust in advisors vs banks and brokerage firms, by HNW investors by age, September 2007

Figure 58: Trust in banks vs brokerage firms, by income, September 2007

INVESTOR PREFERENCES: WHERE TO INVEST—BY RACE/ETHNICITY

Money

Figure 59: Preference for investing money, by race/ethnicity group, September 2007

Retirement savings

Figure 60: Preference for retirement savings, by race/ethnicity, September 2007

Savings accounts vs. investment accounts

Figure 61: Preference for savings and investment accounts, by race/ethnicity, september 2007

Banks still get the checking accounts

Figure 62: Preference for having checking accounts at banks, by race/ethnicity, September 2007

Financial windfalls

Figure 63: Preferred investement for lottery money, by race ethnicity, September 2007

Inheritance

Figure 64: Preferences for investsting inherited money, by race/ethnicity, September 2007

Trust in banks vs. brokerage firms

Figure 65: Trust in banks vs. brokerage firms, by race/ethnicity, September 2007

Independent advisors vs. banks and brokerages

Figure 66: Trust in advisors vs. banks and brokerage firms, by race/ethnicity, September 2007

CONSUMER SCORING OF FINANCIAL INSTITUTIONS

How financial firms are viewed in general

Which firms are viewed as most prestigious

Figure 67: Wealth management providers described as “best overall,” by household income of respondent,

February 2006

Customer service not always superior

Perceived attributes of financial institutions: Familiar

Figure 68: Perceived attributes of financial institutions by HNW and all respondents, by gender: “Familiar”,

September 2007

Perceived attributes of financial institutions: Knowledgeable

Figure 69: Perceived attributes of financial institutions by HNW and all respondents: “Knowledgeable”,

September 2007

Figure 70: Rankings of wealth management providers described as “knowledgeable,” February 2006

Perceived attributes of financial institutions: Safe

Figure 71: Perceived attributes of financial institutions by HNW and all respondents, by gender: “safe”,

September 2007

Perceptions of financial institutions: Reliable

Figure 72: Perceived attributes of financial institutions by HNW and all respondents, by gender: “reliable”,

September 2007

Perceptions of financial institutions: Unique

Figure 73: Perceived attributes of financial institutions by HNW and all respondents, by gender: “unique”,

September 2007

Perceptions of financial institutions: Expensive

Figure 74: Perceived attributes of financial institutions by HNW and all respondents, by gender: “expensive”,

September 2007

Perceptions of financial institutions: Convenient

Figure 75: Perceived attributes of financial institutions by HNW respondents, by gender: “convenient”,

September 2007

FUTURE TRENDS AND FORECAST

Multi-family offices may grow

Potential emergence of structured products

More “Concierge Services”

Separately Managed Accounts will become more creative

Hedge funds of funds will target wealthy

Increasing emphasis on retirement management

Growing markets of wealth

MARKET FORECAST

Millionaire households

Figure 76: Forecast of total U.S. millionaire households, 2006-11

APPENDIX: ADVERTISING AND PROMOTION

Wachovia

Figure 77: Wachovia Wealth Management print ad, focus on investment expertise, 2007

Figure 78: Wachovia Wealth Management print ad, focus on investors needs, 2007

U.S. Trust, Bank of America Private Wealth Management

Figure 79: Bank of America/U.S. Trust print ad, focus on trust, 2007

Figure 80: Bank of America/U.S. Trust print ad, focus on partnership, 2007

Northern Trust

Figure 81: Northern Trust print ad, focus on client contentment, 2007

UBS

Figure 82: UBS print ad, focus on personal attention (You & Us), 2007

Figure 83: UBS print ad, focus on global expertise and goals of the client, 2007

Bessemer Trust

Figure 84: Bessemer Trust print ad, focus on its independence and stability, 2007

Bank of New York/Mellon

Smith Barney

Barclays

APPENDIX: GENERAL INVESTOR ATTITUDES

Shopping for the best deal

Figure 85: Investor feels they always shop for the best deal in financial services, by gender, September 2007

Figure 86: Investor feels they always shop for the best deal in financial services, by age, September 2007

Figure 87: Investor feels they always shop for the best deal in financial services, by income, September 2007

Feeling financially secure

Figure 88: Investor feels they are financially secure, by gender, September 2007

Figure 89: 1,000 adults aged 18 and older with $100,000 or more in investable assets

Figure 90: Investor feels they are financially secure, by age, September 2007

Figure 91: Investor feels they are financially secure, by age, September 2007

Being careful with money

Figure 92: Investor feels they are careful with money, by gender, September 2007

Figure 93: Investor feels they are careful with money, by age, September 2007

Figure 94: Investor feels they are careful with money, by income, September 2007

Company ethics

Figure 95: Investor feels that company ethics are important, by gender, September 2007

Figure 96: Investor feels that company ethics are important, by gender, September 2007

Figure 97: Investor feels that company ethics are important, by income, September 2007.