7 Deadly Sins Wealth Managers Commit while Serving the Ultra High Net Worth | Investment Moats Skip to Content

7 Deadly Sins Wealth Managers Commit while Serving the Ultra High Net Worth

BCG said that in 2020, 6,000 people worldwide became ultras.

This ultra segment grows at 9% a year since 2015.

The ultra is a segment that consist of individuals whose total financial wealth exceeds US$100 million. There are now 60,000 people in this category and they have $22 trillion in investable wealth.

This represents 15% of the world’s total investable assets.

The Ultra High Net Worth Today will be the Ultras of Tomorrow

Over the next 10-15 years, the market that private banking may wish to capture are the unique young ultra high net worth people.

They are age 20 to 50 years old.

They will get their wealth from life-changing inheritance or have built up the wealth themselves.

The interesting thing about this generation is that

  1. They have longer investment horizons.
  2. Greater appetite for risk.
  3. A strong desire to use their wealth to create positive societal impact as well as solid returns.
  4. Their aspirations will differ greatly and wealth managers will aspect them to have different profile.

BCG thinks that there is a lot of opportunities to capture this market. But that opportunity could be a big miss if you don’t do it well.

They identify 7 deadly sins wealth managers commit when serving the ultras.

1. Failure to Segment Well

As I have explained before, most likely, each of these ultras is going to be very different from one another.

Different aspirations and their own cicumstances are also different.

The danger for a corporate firm is to treat them as a homogeneous group.

I have been contacted by a load of prestigious firms, and the outreach was pretty bland. I didn’t take them up on it.

38-year-old entrepreneur in US

When you do that, you neglect to consider an ultra’s key advisers, their gate-keepers and their own staff.

The solution to this is that segmentation needs to be needs-based.

Planning for them needs to be individualized and include the ultra’s whole team.

The wealth advisory firm will need to differentiate their client segment not by the range of affluent, high net worth level 1, high net worth level 2, ultra high net worth but by what they need.

Proper segmentation will better align the family’s values and the kind of communication they are comfortable with.

This means taking seriously the frequency of update, formality and the channel to use.

Most importantly, the wealth manager may need to play their role as part of their team or quarterback and pull a team of staff together.

2. Exchanges are Too Transaction Driven

Wealth managers are so focused on the sale that they contact clients only when transaction opportunities arise.

They fail to account for client needs in completing those journeys.

This result in missed opportunities to bring value and on more occassions to frustrate clients.

It’s off-putting when someone talks to me only because they want me to invest. I’m interested in programs where I get something of value, such as when a Swiss bank brought a group of twenty-somethings together for a week to learn about investing.

27-year-old who works in a family business in China.

The solution to this is to have interaction-driven experiences.

BCG thinks those small moments do matter.

The strong wealth management firms will insist on excellence across every touchpoint.

Instead of leaving their service quality to chance, the good ones will identify individual client journeys and consider what the client’s need at each stage of the journey.

The required service standards include:

  1. Number of days required to open an account
  2. Introduce sales force effectiveness measures design especially for ultra clients.

3. Individual Relationship Managers work in Silos

Many wealth management firms corporatize and create individual departments.

But then what happens is that like alot of companies that are not in the business, business units do not communicate.

This resuls in individual relationship manager islands, gaps in services and the quality of decisions made for clients is not good.

The wealth manager that do well are the ones that truly able to bring the one-bank experience.

Wealth advisory firm will need to be as borderless as their clients.

They need to prioritize internal coordination, enabling relation managers around the globe to tap into client profile information and access expertise.

Doing this will spare clients from the need to repeat basic information and enabling key features such as priority account opening and expedited credit approval across all markets.

4. Too Product-led Engagement

This may be all too famiilar to many of you.

The relationship managers will structure their sales process around the particular product.

When this happens, you get the feeling that it is very less personalized.

BCG thinks the firms that will win are those that are able to create individualized solutions.

Instead of applying one campaign to all the ultras, better segmentation would allow the relationship manager to construct a proposition based on a specifc dimension that the client care about the most.

This would have to be aligned to #2 where performance metrics should support a client-first mindset.

Growth targets are tied to solutions not campaign, with client satisfaction a leading measure.

5. Relationship Manager Driven Reactive Decisions

This is an “Ah gong knows best” Syndrome.

Wealth managers think that they have a good handle on how best to serve ultras.

After all, they have years of experience and intuition to guide them to do this.

It’s unpleasant when it feels like wealth managers are trying to sell me something. Another pitfall some of my friend’s experience is assuming people my age understand what they are talking about when they may have no clue.

22-year-old working for a venture within the family’s wider business.

It is quite interesting to hear the profile of what the young ultras considers as their desired adviser:

Informality is important and a small age gap (no more than 15 years).
I’d also like someone I click with and who takes the time to explain things properly.

My ideal adviser is highly experienced. I want the really smart, awkward guy from The Big Short, not a well-dress slick talker!

My ideal relationship manager is a person of high integrity and competence. Care and professionalism are crucial.

“B players” go into wealth management. Competence is in such short supply.

I don’t believe they can outperform the market. If they did, I’d ask, “Why you aren’t working for a hedge fund?”

BCG effectively is saying while experiences are valuable they are not the be-all and end-all.

The firms of the tomorrow will have strong data and analytics backbone.

You will need to make effective recommendations. The rewards to delight clients have to be effective as well.

This makes robust data gathering a priority. The firm will need to invest in specialised algorithms to aid sales planning.

The analytics of client’s usage pattern will surface a client’s implicit need for leverage, much better than an adviser can gather.

Data that shows client sale of his or her business may indicate client is about to experience a life change.

The ability to view a client’s aggregated positiosn can be a powerful advantage, allowing relationship managers to offer holistic investment advice that helps clients avoid overindexing, while also grow wallet share.

6. Approach is too Human

Many wealth management believe that a high-touch model must be human-centered.

This leads them to underinvest in digital tools and platforms.

Perhaps more firms are agreeing with BCG given that they are all spending capital on digital platforms and apps.

These platform is to support human interactions across channels.

These investments allow the wealth manager to excel at the basics and build from the basics, providing clients with digital enablers such as at-a-glance view of their global portfolios and interactive modelling.

In Asia, for example, clients often interact with their relationship managers through Whatsapp and WeChat.

Mobile apps can also enable self-serve and direct chat. And responsive design ensures that information is easy for clients to access and read.

These digital tools support human interactions so that clietns ahve the right information and functionality at their fingertips.

7. Assuming the Next Generation will be Loyal to the Wealth Manager

Some wealth managers imagine that the next generation of their existing clients will automatically stay with their family’s current wealth manager.

That can be a dangerous assumption.

The solution perhaps is to earn the next generation loyalty today.

Like luxury brand leaders, the innovative welath managers build authentic connections and foster lifetime relationships.

Relationships do take time to develop.

And so the wealth management firm needs to tell the managers to be consicous about this. They would also have to setup events, not alway s around the theme of wealth to foster the building of these relationships.

My wealth manager is engaged when I graduated. The timing was perfect. We’re in regular contact (WhatsApp and bi-weekly calls).

He shares articles and brings a wide perspective on the managerial aspects of private companies. I enjoy learning from him.

– 22-year-old working for a venture within the family’s wider business.

Summary

These 7 deadly sins listed can both be an opportunity for an up-and-coming firm trying to define its identity in this business.

It serves as a warning for those firms who realize the pond in the lower asset under management market is unconducive to play with that what worked for that segment might not work so well as you move up.

For my readers who are not ultras (that is probably… a lot of us), we can pay attention to whether you are looking for needs like this or your focus is still on investment returns.

Does the engagement turn you off? Do you feel the applications are beneficial compared to how things are 7 years ago?

Were your adviser too focus on consistently iterating to you how human they are? Does it feel frustrating to always have to repeat your lfie story to every one?

They do apply to the ultra high networth. For some of the high net worth, this might apply too.

Even if you do not have too much money, this is the right way to serve as well. The question is whether there is a right business model to bring you this service.

When there is friction, there is an opportunity for someone to do better.

If you are interested, you might want to read why based on some data, the affluent in Singapore may be rich but not rich enough.

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