Jun 17, 2020
What is wealth management?
Wealth management is both a financial planning and investment advisory service that is offered to high-net-worth individuals (HNW) and family offices to support them in managing their money. Wealth management companies provide a range of services such as commercial investments, real estate investments, equity strategies, portfolio management, etc.
Wealth management is conducted as a consultation, where the advisor listens to what their client’s needs and offers bespoke strategies and solutions. Wealth managers will utilize various financial disciplines available, such as financial, legal, investment, real estate, accounting, and tax advice.
What is a high-net-worth individual?
A high-net-worth individual (HNWI) is a term often used by the financial services industry to describe either a person or family with a substantial amount of liquid assets. While there is no specific definition of how rich someone must be to fit into the HNWI category, countries appoint financial institutions to decide on a particular range. The U.S. Securities and Exchange Commission identifies a “high-net-worth individual” as a person with a net wealth of at least $1,000,000 normally have an of over a million dollars.
Another two definitions of high wealth individuals are very high-net-worth individuals (VHNWI) with a net worth of at least $5 million. Ultra-high-net-worth individuals (UHNWI) are defined as people with investable assets of at least $30 million (excluding personal assets like the primary residence, collectibles, and consumer durables).
Some of the world’s wealthiest families/individuals are:
- Jeff Bezos: Founder of the biggest online marketplace in the world, Amazon.com which he currently runs as its CEO. Jeff Bezos net worth is $116.9 billion.
- Walton Family: The richest family in the United States that owns the grocery store chain ‘Walmart’. The family’s estimated net worth is $190.5 billion.
- Bill Gates: The co-founder of computer hardware/software giant Microsoft who is currently worth $99.9 billion.
- Mars Family: Created by Forrest Mars, Mars Inc is a global manufacturer that produces chocolate, pet food, and other food products. The company is currently run by Jacqueline and John Mars and has an estimated net worth of $126.6 billion
- Al Saud – Saudi Royal Family: The House of Saud has ruled the country for practically a century and is comprised of over 15,000, although approximately 2000 of them possess the most wealth and influence. The current King of Saudi Arabia is Salman bin Abdulaziz Al Saud, while his son, Mohammed bin Salman (colloquially known as MBS) is the prime minister of Saudi Arabia. The family’s estimated worth is $100 billion.
According to the World Wealth Report that is co-prepared by Capgemini and Merrill Lynch, the global HNWI population is 17 million, with their total wealth being $46.2 trillion. The world’s most affluent investors reside in Asia, where there are over 6 million high-net-worth individuals with a combined total wealth of $20.56 trillion. The US comes extremely close 5.68 in the country alone and with a combined net worth of $19.58 trillion.
How do wealth management firms work?
Wealth management is more than simply investment advice; wealth managers help individuals to manage their finances for a fee. Clients will pay for managed account services where the wealth management firm trades on behalf of their clients. In addition to this, wealth managers are offered tax planning, retirement planning, and estate planning services.
An important aspect of wealth management is relationship management. It’s essential for the wealth management firms to have a pleasant and trustworthy relationship with the HNWI. For this purpose, wealth management firms usually assign a relationship manager who will meet the client directly to discuss their portfolio and strategies. The actual execution of investments is done by an investment professional. UHNWI individuals may even have a whole team of professionals assigned to them although usual a single relationship manager will serve as the main representative.
Sometimes, wealth management firms will consult third-party advisors such as financial experts, attorneys, etc. to create the ideal strategy for their client. Wealth management firms even provide advice on charity and philanthropy.
What are some of the top wealth management firms?
While size is not everything, wealth management firms with a substantial amount of assets tend to attract more affluent clients. In order to provide wealth management services, investment firms must be an RIA (registered investment advisor). Top U.S private-client firms provide services for individuals with over $5 million in non-personal assets.
UBS Wealth Management is amongst the top-ranking wealth management firms in the US, despite being a Swiss-based investment bank. Bank of America is the parent company of Merrill Lynch. Currently, it has over 7000 wealth managers and 208 branches across the country. It generates roughly $3.5 billion gross in profit from managing the wealth of high-net-worth individuals.
USB offers a range of services such as investment banking. Investment management, wealth management, and even retail and commercial banking.
Bank of America
Bank of America Corp.’s Global Wealth & Investment Management is considered to be one of the top investment companies in the world. Currently, it has over 20,000 wealth managers and 750 branches across the USA. It generates roughly $4.1 billion net in profit.
Bank of American offers commercial banking, wealth management, and investment banking.
Morgan Stanley Wealth Management is an American investment bank that is Bank of America’s direct competitor of Bank of America. It has over 15,600 wealth managers and over 600 branches. Morgan Stanely grew significantly when it merged with Smith Barney.
Morgan Stanley’s main services are institutional securities, investment management and wealth management.
J.P. Morgan Chase
J.P. Morgan Chase is the largest U.S bank and wealth management company with an AUM of over $700 billion. Currently, the company has over 1,300 wealth managers but only 48 branch offices. The company earns approximately $1.5 billion gross in profits.
J.P Morgan chase is both a universal bank and a custodian bank; it provides a range of services such as private banking, investment banking, private wealth management, asset management and treasury services.