In light of fast growing personal wealth across the globe, wealth management businesses are facing a conundrum.

In light of fast growing personal wealth across the globe, wealth management businesses are facing a conundrum. Should they bring private banking services down the scale and court growing numbers of affluent individuals or concentrate their efforts amongst the ultra high net worth? Historically, wealth managers have been reticent about stating specific entry levels for their services, so as not to put off potential clients. But according to Catherine Tillotson, a partner at wealth management consultancy Scorpio Partnership, this is beginning to change. “There is much debate in the industry about profitability of different segments. There has been a distinct polarisation in wealth management with firms tending either to concentrate on the core affluent segment, with minimum investment thresholds starting at up to $1 million investable assets, or on those with upwards of $25 million to invest.” Ms Tillotson says that at the lower end of the spectrum, you have volume and with the right products and distribution mechanism, it is possible for wealth management firms to successfully achieve critical mass. Many private banks have deliberately kept their minimum thresholds low to capture emerging wealth, with tailoring applied to higher net worth segments. For example, single hedge funds strategies starting at around $10 million, she says. A WealthBriefing straw poll of key players in the industry, including Barclays Wealth, Coutts, Kleinwort Benson, Merrill Lynch Global Private Clients and UBS, reveals that the minimum investable assets threshold tends to be at around the $1million mark. Mark Kibblewhite, managing director, Barclays Wealth explains the rationale: “Our vision for Barclays Wealth is firmly driven by the wish to give clients the wealth service they deserve irrespective of their assets. Whereas some organisations have chosen to focus only on those with £10 million ($20 million) plus, we believe we can provide quality service and advice to clients without being restricted only to the very high end of the market. The level of tailoring and specific structuring is driven by the complexity of an individual client’s requirements. We are forming a partnership with each client, so meeting their exact requirements at the appropriate price is a must.” Louise Collins, spokesperson for Kleinwort Benson, which is currently expanding its UK regional network, told WealthBriefing: “Strictly speaking our minimum investable assets threshold is £500,000 and we tend to tailor our investment management more as a client’s investable assets increase. That said, there is a point where it becomes inefficient to tailor further. Only a few firms concentrating on the ultra high net worth end of the market offer a completely bespoke service.” Firms with minimum thresholds for discretionary portfolios at around $20 million include Bedlam Asset Management and Fleming Family & Partners. Goldman Sachs International, J P Morgan Private Bank and Lazard Asset Management have minimums of around $10 million. Focusing on the ultra-wealthy, however, is not without its challenges Catherine Tillotson points out: “In the ultra high net worth space, you see a much more sophisticated, tailored service. There are lots of firms - up to fifteen global players - in the ultra high net worth space going after just a few thousand people with the requisite multi millions to invest,” she said. “Competition means that margins are tight, compounded by the fact that the super wealthy tend to negotiate their fees in a very skilled way. They also have extremely high expectations and will often demand that their private banker is on the next plane if needed. Along with this, there is the expectation that successful private bankers will stay at the best hotels and dine at the best restaurants. There is an added complication in gaining share of wallet as they are almost always multi-banked for security and privacy reasons and might have $25 million with each of a number of firms.” Credit Suisse has no strict minimum assets criteria, but says that its services on the international side are best suited to clients with over $20 million, as it seeks to leverage the institutional facilities that its investment banking arm has to offer. Jeremy Marshall, chief executive officer of Credit Suisse’s UK private banking operation told WealthBriefing in an interview last year: “To service clients at this level, it really helps that we’re in the same building as the investment bank and that we can use the institutional facilities that it has to offer. We have a huge advantage in being able to offer private clients an institutional capability. One instance of this is that we have a unique specialist shipping finance unit within the private bank itself.” Citi Private Bank tends to have clients with investable assets in the region of $5-10 million, but across the group, Citi provides services split into three tiers starting at $100,000. According to a spokesperson, its private banking clients are very sophisticated and expect a highly bespoke service. “Unlike most large banks, our banker to client ratio is quite low at around 1 to 40. We provide a truly tailored approach to all elements of our business, underlined by strong asset allocation. Our aim is to be the ‘go to’ firm for (ultra) high net worth clients in entrepreneurial wealth, property investors and private equity players, where we have a large degree of expertise.” For other private banks, concentrating on trends other than minimum assets is key. Veit de Maddalena, acting global CEO of Rothschild Private Banking and Trust says: “I don’t see a trend towards higher minimum entry levels. Instead, the main trend we are seeing is growing demand for cross-border wealth management, as clients become more internationally mobile. Here, we are well-positioned, particularly given our internationally renowned trust business.” And it seems that there is still much to play for at either end of the wealth spectrum. Recently, Barclays Wealth predicted that those with aggregate wealth in excess of $3 million will increase by between 118 per cent and 298 per cent across G7 households by 2016. At the same time, it is expected that the proportion of households with aggregate wealth worth more than $500,000 will increase by at least 10 per cent in each G7 nation.