US private banks are turning their backs on the mass affluent to go after high net-worth clients, whose minimum threshold of assets to inves...

US private banks are turning their backs on the mass affluent to go after high net-worth clients, whose minimum threshold of assets to invest is now pushing the $10m mark, according to a new study. Banks and brokerage firms are offloading smaller accounts and promoting managed accounts to gain higher revenues from a smaller number of high net-worth clients, according to Cerulli Associates, the Boston consulting firm. The report,Trends Among US High-Net-Worth Providers, also re-positions the domestic HNW market as those with more than $5-10m in assets to invest. It defines the mass affluent as those with $500,000-$5m in investable assets. Four years ago the US high net-worth market was defined as private clients with more than $1m in assets to invest, according to Cerulli. The concept of raising the bar for minimum investment levels in private banking has for some time been a topic of considerable debate among leading private banking houses and consultants. "Making a profit with full service wealth management for HNWs means that in today's market we are also noticing an increased minimum investment level," concurred Catherine Tillotson, director of research at Scorpio Partnership in London. The mass affluent are being relegated to online technology platforms or general service call centres by their increasingly ambitious banks, says the report. “Providers are using technology to leverage smaller account sizes. They are using online technology and saving their personal service for the high net -worth clients,” Shealyn McGuire, chief author of the report, told Private Client Management. Discount brokerages that have mastered volume-based pricing models should take the opportunity to capture the fall out from full-service banks and brokerages, the report advises. “As the threshold definition of HNW in the brokerage industry reaches $10m, clients will choose to do business where they are best treated,” it argues. Financial service providers aiming to ensnare high net worth individuals must set their aggregate account minimums at $10m, according to Cerulli. “Ranking firms catering to HNW clients by their minimum account sizes, we see that smaller firms were unafraid to set their minimums at levels higher than $1m. Larger providers often desire higher-level clients, but they still primarily attract mass affluent accounts,” says the report. An increased appetite for alternative investments among clients and their money managers has been a key driver in pushing up the minimum threshold for US HNW clients during the last four years, explained McGuire. “There has been greater investment in venture capital, private equity deals and hedge funds. Although the minimum thresholds for alternative investments have come down, giving the less wealthy something to play with, investors have to put down a reasonable amount to benefit,” she said. “The gap may also seem larger because the mass affluent tag was not used as much before. We are trying to make talk about mass affluent segments less blurry,” said McGuire. The report is the first on the high net-worth sector to be produced by the firm, based in London and Boston, which plans to publish it annually. It analysed primary and secondary high net-worth data, and conducted in-depth interviews with senior executives at financial services companies. The 125-page report costs $10,000.