Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Winners Amongst Wealth Management Firms

Posted by William Byrnes on July 30, 2009


In my last blogticle, I discussed the Winning Strategies of the Holistic Wealth Management Service Model.  This one focuses on the winning firms within the wealth management industry.

Because the wealth management sector continues to out or evenly pace other sectors in terms of firms’ and employees’ earnings, certainly in light of the demise of some bonus schemes in the investment management business units, the sector has grown more competitive with new boutique firms entering monthly.  Is there room for such increasing competition? 

According to the Oliver Wyman Report 2008, only 50% of HNWI assets are professionally managed or advised.[1] Thus, millions of HNWI and families do not yet leverage a private wealth manager’s services!  And recall from my earlier blogticles that the global top ten wealth management firms manage less than 20% of high net wealth assets.[2]  Three types of firms in the wealth management industry have shown significant growth in the past seven years in capturing client share.

Firstly, investment team boutiques that create and manage internationally oriented transparent investment funds focusing on alternative investments, such as emerging market strategies.  These boutiques appeal to both HNWI’s directly, competing with larger institutions, and to the institutions themselves, in collaborative arrangements.  The World Economic Forum proposes that future alternative investment classes offering beta return to HNWI portfolios may include:

(1) infrastructure finance,

(2) intangible assets (such as intellectual property),

(3) research and development exposure,

(4) mega-trends,

(5) frontier markets,

(6) distressed assets, and

(7) insurable risk.[3]

Secondly, family office firms employing holistic family business and tax management and lifestyle solutions, sometimes in combination with investment management services, are making great strides in picking up HNW families.  83 US based multi family office firms managed $334 billion, which as of the third quarter of 2008 represented just 19% of total assets under management of the global hedge fund industry.[4]  However, because of the 2009 disengagement from ‘opaque’ hedge funds by HNWIs, ‘transparent’ multi family offices will likely have made substantial strides toward closing the assets under management gap.[5] 

Thirdly, local and regional banks are successfully expanding HNWI client base against the national brands.  Cap Gemini estimates that 2009 will see a 31% HNWI client growth for local/regional banks over 2008.  Polling of HNWIs indicates that the risk of institutional and financial markets stability has led them to perceive local and regional banks as comparably safer.[6]

I should mention that compliance advisory service firms that have been established to serve financial service providers have experienced phenomenal income growth from 2002 onward.  I will address more about this topic of compliance in my next blogticle.

Professor William Byrnes (www.llmprogram.org)


[1] The Future of Private Banking: A Wealth of Opportunity?, Oliver Wyman (2008) at 4.

[2] The Wealth Management Report 2009 Meeting the Expectation of UK High Net Worth Clients JP Morgan at 11.

[3] The Future of the Global Financial System, World Economic Forum’s World Scenario Series (2009) at 33.

[4] The Future of the Global Financial System, World Economic Forum’s World Scenario Series (2009) at 36.

[5] The KnightFrank (Citi Private Bank) Wealth Report 2009 at 12.

[6] Cap Gemini Merrill Lynch World Wealth Report 2009 at 24.

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