The private wealth industry is changing fast. If you want to build a high-end, highly profitable advisory practice, it is important to be aware of these changes and strategically adjust your actions. One significant area in transition is the world of the high-net-worth client.
The following three key trends concerning private clients show the enormous opportunity for wealth managers, as well as a few complications:
1. Private wealth throughout the world is booming. The number of wealthy individuals, including super-rich clients worth $500 million or more, is expanding at a prodigious rate. Moreover, the wealth they control is increasing even faster. Clearly, the wealthy are financially distancing themselves from the rest of the population more than ever before.
The implication of this is that there is an astounding and growing opportunity for talented professionals, including wealth managers, to deliver value and handsomely profit. The complication is that the high end of the private wealth industry is where the serious profits primarily are motivating more and more professionals to seek them out.
If nothing else, the influx of new professionals will certainly cause static in the system—distractions for the affluent. Therefore, if you are not taking a very systematic approach to cultivating the wealthy, it is unlikely you will be able to take full advantage of the opportunity.
2. The affluent are increasingly diverse. It is not just old money, it is not just tech money, and it is not just celebrity money. It is all these sources of wealth and many more.
Today’s wealthy are a more diverse and culturally interesting cohort than ever before. While business ownership is still the most reliable route to significant wealth, a broader range of people benefit from these dynamics—including more women, minorities, and youths – and help the 1 percent look more demographically representative of the 99 percent.
This can either be a positive or a negative depending on how you approach it. To benefit requires a very expansive outlook. It also requires greater cultural sensitivities.
3. The affluent are increasingly cautious and vigilant when it comes to the professionals they engage. The wealth management industry is replete with a great many pretenders who are professionals that mean well but are not up to the task. There are also a smaller number of criminal predators focusing intently on separating the wealthy from their money through cunning and duplicity.
The expansive use of stress testing by the wealthy is aimed at ensuring mistakes are not made, missed opportunities are identified and utilized, and predators are quickly exposed. There is no doubt that the services and products you provide the wealthy will sometimes be questioned. This is more likely the case as you move up the wealth spectrum. Therefore, it is imperative that you make certain you are delivering exceptional value always.
Each of these three trends results in opportunities and conundrums for wealth managers seeking to source and work with the affluent. By recognizing these trends, you are likely better able to take appropriate actions to capitalize on them.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.
