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Ultra High Net Worth Wealth Management

High Net Worth Wealth Management Firms—Four Drawbacks

Is bigger always better?

When it comes to ultra-high net worth wealth management companies, the perceived stability stemming from having billions in assets under management applies to these companies, not your portfolio. As an ultra-high net worth investor, you can’t afford to make that assumption. There’s too much at stake. If your portfolio goes down, rest assured—their company won’t.

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STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION

7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

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This article will explain four reasons why the biggest wealth management firms may not offer the elite-level specialization you need.

If you want a really thorough look into why ultra high net worth wealth management companies can’t deliver for ultra high net worth investors who have $5 million or more in investable liquid assets, get our free book and discover the 7 Secrets To Wealth Management and Financial Serenity.

When you hear about ultra high net worth wealth management firms that manage hundreds of billions, or even trillions in the cases of industry toppers like Bank of America and Morgan Stanley, you pay attention.

But is bigger necessarily better?

Here’s a more rational approach:

When it comes to ultra high net worth individuals, who have far more to lose (and gain), depending on which ultra high net worth wealth management firm they choose to work with, a lot of consideration should be given to weighing the importance of the size of the firm.

Top 10 High Net Worth Wealth Management Firms by AUM

Top 10 High Net Worth Wealth Management Firms by AUM

2023 RankName2023
1UBS Wealth Management$2.6 trillion
2Credit Suisse$1.25 trillion
3Morgan Stanley Wealth Management$1.24 trillion
4Bank of America Global Wealth & Investment$1.22 trillion
5J.P. Morgan Private Bank$677 billion
6Goldman Sachs$558 billion
7Charles Schwab$506.3billion
8Citi Private Bank$500 billion
9BNP Paribas Wealth Management$424 billion
10Julius Baer$423.5 billion
Source wealthprofessional

Consider These Four Reasons Why a Large Ultra High Net Worth Wealth Management Company isn’t Necessarily Your Best Option

While large wealth management firms are responsible for managing billions or even trillions in assets for high net worth individuals, they may not provide you with the customized, personal service from which your portfolio would benefit the most.

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Large Ultra High Net Worth Wealth Management Firms Can Obliterate Your Growth on Avoidable Taxes

1. Large Ultra High Net Worth Wealth Management Firms Can Obliterate Your Growth on Avoidable Taxes

As Forbes puts it, a wealth manager might think they’re performing exceptionally well with 15% gross returns, but tax rules “could make that initial awe-inducing number closer to 3% after factoring in total management fees, fund expenses, and taxes.”

Ouch.

Costs and taxes like these can eat away at performance gains in far bigger chunks than you might realize. These costs and taxes aren’t just chipping off fragments from your gains. They could be splitting them in half, or worse. Here’s a more in-depth look at the benefits of private independents versus large public firms.

Are large ultra high net worth wealth management firms better than specialized ones at tax minimization?

In all likelihood, they’re worse at it in part because they have such large staffs (Morgan Stanley has 15,500 wealth managers).

Think about it:

The chances are low that all of them operate at the high level required to stay on top of the ever-changing tax strategies needed to maximize growth and minimize losses for each of their individual clients.

Especially for the far more complex portfolios of high net worth investors.

In reality, only a fraction of those advisors operates at the high level needed by investors like you.

But, since they typically have large caseloads, they tend to have less time to devote to the unique scenarios facing each of their ultra high net worth clients.

Are you okay being the odd one out?

With 15,000 wealth managers, it’s akin to playing roulette.

Click to Tweet: Using a company with 15,000 wealth managers is like playing roulette with your portfolio.

The wheel spins, and…

Which of their wealth managers will you end up with?

Then in a few years, it spins again when your manager leaves or is promoted.

You probably won’t keep the same person for the decades you’ll depend on them. You’ll end up being switched around with all the inevitable turnover, re-organizations, and personnel changes that occur at large firms.

The point is:

At a large ultra high net worth wealth management firm, you have a greater chance of losing money to avoidable costs and taxes than you do at a smaller firm that specializes in ultra high net worth wealth management.

The Abundance of Wealth Managers Dilutes the Expertise

2. The Abundance of Wealth Managers Dilutes the Expertise

Think about it:

Expertise cannot exist across an entire industry. That defies the meaning of the word "expertise." It refers, by definition, to an elite group.

If you take the time to look, you can always find high-performers operating at levels exceeding those of the masses, within a given industry. The same holds true in ultra high net worth wealth management firms.

At the top, you have elite performers and industry savants who exist above and outside their industry. They define and redefine ultra high net worth wealth management, as the global and market picture continually evolves.

Those are the ones you want.

The larger group of less experienced wealth managers beneath them are followers.

How does this second tier operate?

They do what they’re told. Check off boxes. Follow pre-written sets of directions and procedures—written by the elite performers.

Some ultra high net worth wealth managers are part of the elite league, which has between one and a few members in the largest ultra high net worth wealth management firms. However, considering there are tens of thousands of wealth managers on the global staff of big firms, what are the chances of catching that diamond in the rough?

Not good.

Here’s a much better source:

At specialized ultra high net worth wealth management firms, the expert is usually also the owner/partner. He or she is directly involved with each client—not passing the work off to subordinates and "employee advisors."

And at smaller, more specialized, elite, ultra high net worth wealth management firms, the owners/advisors are not only directly and intimately involved in the portfolio of every investor, but they know these people by name, their kids' names, and even what colleges they went to. Even their pets.

More than that, they know their business situation, mortgages, investment performance, and short- and long-term life goals and dreams.

All this makes possible an essential service:

Building a customized plan for each investor that looks unlike any other plan because it’s been precisely aligned to that person’s needs.

At large ultra high net worth wealth management firms, many ultra high net worth individual investment plans look eerily and disturbingly similar.

Why?

Because those plans don’t receive the customized attention they would get at the more specialized ultra high net worth wealth management firms. That’s the inevitable result of having to "hire down," as the large firms must continually do to fill their wealth manager pipelines as demanded by constant growth.

Here’s a scary result of that:

"Employee advisor" has become the most common job title for workers at financial advisory ultra high net worth wealth management firms. You don’t want someone learning on the job while managing your ultra high net worth portfolio. At the large ultra high net worth wealth management firms, the likelihood you’ll end up with such a person is much higher than at a specialized firm. It’s simple probability.

Assets Under Management (AUM) Is a Misleading Indicator

3 Types of Ultra High Net Worth Individuals

The ultra wealthy individuals who require services for the management of wealth fall under three categories.

1. The high net worth individuals possess assets of $1 million

2. Very high net worth individuals have assets ranging between $5 million and $30 million.

3. Ultra high net worth individuals have a total asset value exceeding $30 million.

Calculate Your Net Worth

It is simple to calculate by simply adding up the value of all of your debts and subtracting that from the total worth of your assets.

3. Assets Under Management (AUM) Is a Misleading Indicator

Net revenues from wealth management across Charles Schwab's Investor Services unit were 14.6% higher in 2017 compared to 2016. The same figure for Wells Fargo was a rather modest 4.9%.

Yes, that data is a bit old, but this is the point:

Did Schwab really do "better" than Wells Fargo that year?

Well, yes, but not really in a way the question implies. According to Investopedia, their revenues increased mainly because of "increases in asset management and administration fees."

In other words, they made more money, but that doesn’t mean you did.

Simply looking at revenue growth, income growth, amount of assets under management, and other indicators at various ultra high net worth wealth management firms doesn’t tell you what you really need to know.

For a deeper look at the seven warning signs that matter most when choosing an advisor at an ultra high net worth wealth management firm, see The 7 secrets to Nigh Net Worth Investment Management, Estate, Tax and Financial Planning.

We consider this a fairly obvious point:

Bigger doesn’t mean best for you.

Revenue growth simply doesn’t tell the whole story because you don’t know how much money is being made from fees, taxes, and other costs paid by their investors.

Or, put another way: Revenue growth bears little correlation to portfolio growth for the customers.

Do you need a wealth manager for higher wealth?

With increasing wealth, the probability of needing the service of a good wealth manager will also increase. Your financial situation becomes more complicated. You have more and larger assets. You have more and larger investments. You may have a business. Your taxes get more complicated as you accumulate more money.

Large Firms Have Fewer Specialists

4. Large Firms Have Fewer Specialists

One-stop shopping has proven wildly appealing at big box stores. But when it comes to ultra high net worth wealth management firms—one-stop investing is the last thing you want.

Why?

Because the level of additional service you require exceeds that of the vast majority.

Click to tweet: One-stop shopping is great. But one-stop investing is the last thing high net worth investors should want.

You don’t need just any estate planning attorney. You need one who has sat through dozens of high net worth estate administration meetings and seen countless scenarios unfold.

You don’t need just any mortgage and real estate advisor. You need one who has handled properties for celebrities and moguls.

You don’t need just any tax accountant. You need one called by the courts as an expert witness in cases making headlines. Actually, you need one who turns down the courts because she’s too busy working with more important clients—like you.

The point is, none of these elite-level, category-of-one experts work at large banks. They operate their own specialized firms. Why?

Because they are specialists.

Click to tweet: Specialist advisors own their own firms. Average advisors work for big companies and banks.

No estate planning elite specialist works at Wells Fargo.

While big banks and large wealth management firms may offer these other financial services as part of their high net worth wealth management packages, those services are not represented by the best of the best in those respective fields.

You will not find the best team all in one place.

You will find the best team only by searching for the most experienced and specialized experts running their own elite-level, and smaller, firms. And just as this is true with estate lawyers and accountants, it’s also true with wealth managers.

Importance of UHNW Wealth Management

The Importance of UHNW Wealth Management

Having an ultra-high net worth brings challenges and opportunities in multiple areas of financial management, including investing, risk mitigation, tax planning, and more. While these services are offered by most financial advisors, UHNW status means that the investor has more complex problems and needs due to the size and diversity of their accumulated assets. This massive accrued wealth also brings exciting benefits in the realm of alternative investments (hedge funds, real estate, etc.) not within the reach of the ordinary investor.

Comprehensive Services in UHNW Wealth Management

For UHNW clients, wealth management is much more than giving advice. Rather, it deals aptly with the complex financial landscape in which these individuals operate. This includes customized plans offering investment management, risk assessment, tax planning, and estate planning, among other core services.

This distinction arises from the fact that UHNW wealth management professionals deal with tremendous assets and high-risk exposures; they must carry in-depth expertise that involves creating and implementing plans serving the objectives of their clients while applying risk-minimization measures. Mostly, UHNW individuals seek wealth management services to help them maintain and increase their considerable wealth while taking into consideration the unique challenges that generally accompany such significant affluence. But, in this demographic, total wealth management entails more than investment advice; it includes risk management, tax optimization, estate and legacy planning, private equity, and philanthropic ventures. These professionals work hand in hand with their clients to ensure that all of their financial needs are met, their investments are protected, and their long-term objectives are attained.

Investment Management

Wealth managers develop investment plans for their UHNW clients, giving due consideration to all the asset classes in which their clients have an interest. These clients are often interested in alternative assets, which offer the potential for significant returns. These assets need to be balanced with more conservative investments, such as cash and income-producing investments since alternatives also come with greater risk. The client’s risk tolerance, time horizon, and objectives and desires are kept front and center in this process.         

Risk Management

Greater wealth comes with greater risk exposure. Wealth managers are tasked with identifying and mitigating risks, which can entail large sums of money for UHNW individuals. Risk is managed in the areas of potential investment losses, taxation, and estate planning.

Tax Planning

Efficient tax management is crucial, particularly in UHNW wealth management, where the tax burden is greater. UHNW wealth managers can help clients minimize their tax liabilities through tax-loss harvesting and the use of trusts, for example. These strategies aim to preserve wealth for future growth.

Estate and Legacy Planning

Because UHNW individuals have large estates, it’s crucial to ensure that future generations, as well as beneficiaries, can preserve the assets in the estate to continue to benefit from their growth. An effective estate plan is one where the client’s wishes are fully realized regarding how their wealth is transferred to their beneficiaries while minimizing estate taxes and preserving wealth.

Philanthropic Planning

UHNW individuals can make a significant impact in charitable giving, due to their wealth. Many of these individuals are strongly committed to contributing to the advancement of causes that they care about. Wealth planners can lend their expertise to the establishment of trusts and foundations to satisfy this goal.

Which is the UHNW Wealth Manager for You?

Which is the UHNW Wealth Manager for You?

An important decision for UHNWIs in the selection of a wealth manager. Strategic alliances, bespoke advice, rigorous and transparent fiduciary responsibility, and transparency all within the bounds of the intricate financial landscapes and colossal asset base for UHNWIs. In this guide, we will walk you through some of the key considerations UHNWIs need to be aware of to ensure a safe and successful financial journey in the selection of a wealth manager.

UHNWIs often have unique financial needs and goals that demand the expertise of qualified specialists.

They should employ wealth managers who have experience managing high-net-worth portfolios and demonstrate individuality in financial planning.

Thus, this paragraph sets the mood for a description of the characteristics and values that reflect a reliable and good UHNW wealth manager:

Fiduciary Duty

The financial advisor chosen by a UHNWI should be a fiduciary, which means they always put their clients’ interests above their own. This helps prevent conflicts of interest. The advisor is free to offer an unbiased opinion regarding financial planning activities, such as asset selection.

Expertise and Experience

The financial advisor should have the skills and knowledge required to provide financial services to UHNWIs. Preferably, they would have years or even decades of experience in managing high-net-worth portfolios. Their expertise can be reflected in their education, training, and certifications.

Customized Approach

Because of the diversity of client circumstances, needs, and goals, the advisor should be able to provide financial planning services that are tailored to the client’s situation. The advisor takes into account the client’s risk tolerance as well as their goals and wishes for financial security.          

Transparency

An expert wealth manager is transparent about their fees so the client has a clear understanding of the cost of the services provided and can weigh their benefits against the costs.

Long-term Relationship

The wealth manager should have good communication skills so they can build long-term relationships with their clients. These relationships can span decades and across generations as the client navigates wealth acquisition, growth, and transition to future generations.

A Customized Asset Allocation Strategy Protects Against Market Volatility

A Customized Asset Allocation Strategy Protects Against Market Volatility     

The history of market declines due to pullbacks, corrections, and bear markets serves to highlight the volatility of financial markets. It also shows that recovery times increase with the severity of the decline. Your portfolio with rise and fall with these trends. However, at Pillar Wealth Management, the degree of portfolio fluctuation distinguishes our customized investment, tax minimization, and estate planning strategies from those of most other advisors.

Historical considerations are important. What also matters is that your wealth manager takes into account your goals and aspirations for the next 30 or 40 years. It also matters that your portfolio undergoes quarterly stress tests. Your success is measured by performance, and your advisor understands the importance of strategic money management for meeting your day-to-day needs and long-term goals. 

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Ultra-high net worth wealth management comprises those financial services that meet the needs of individuals with at least $30 million in liquid assets.

That level of wealth allows the individual to take advantage of investment opportunities not available to ordinary investors.

 

The primary goal is to preserve and grow the UHWNI's wealth for today and future generations.

Because of the size of their estates, UHNWIs want to ensure that their wealth is passed on to their beneficiaries smoothly and tax-efficiently.

Because they are wealthy, UHNWIs tend to want to use that wealth to benefit their community and society as a whole by giving to causes they care about.

UHNWIs often rely on expert wealth managers to create an investment strategy that protects and grows their wealth through diversification of assets, typically including alternative investments not accessible to mainstream investors.

A family office is a financial advisory firm that manages the wealth of a single UHNW individual or family. It focuses on meeting their financial needs, which can extend to concierge services such as budgeting, banking, and vacation planning.

Tax-efficient wealth management includes activities such as tax-loss harvesting and using trusts.

UHNWIs face challenges from the ever-changing tax code, the need to maintain their current lifestyle into retirement, and creating a tax-efficient and equitable estate plan.

It helps to have a financial advisor who can create a financial plan that meets the long-term goals of the UHNW individual, incorporating all aspects of their financial circumstances and implementing investment strategies that balance returns and risk effectively.

Authors

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

More from authors.

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