Business Terminology: Wealth Management

9.23.11

Wealth Management:  There is no specific definition for wealth management. In general it means, financial services provided to high net worth clients, mainly individuals, families, and occasionally small, private companies. Private banking has existed for a long time, dating back as far as the seventeenth century in the form of various British private banks.

Wealth Management itself only really came into common industry parlance in the last 15 years. It was the response to the arrival of greater affluence in the latter part of the twentieth century, increasingly sophisticated client needs throughout the wealth spectrum, a desire among some clients to be actively involved in the management of their wealth, and a willingness of retail banks and brokerages, to extend their offerings to meet the new demand.

Asset management services are at the heart of the wealth management industry. But wealth management does not comprise of only asset management. It puts focus on both sides of the client’s balance sheet. Wealth management has a greater emphasis on financial consulting and is used to gather, maintain, preserve, enhance, and transfer wealth. These are all included in wealth management.

I. Brokerage

II. Core banking-type products, such as current accounts, time deposits and liquidity management.

III. Lending products, such as margin lending, credit cards, mortgages and private jet finance.

IV. Insurance and protection products, such as property and health insurance, life assurance and pensions.

V. Asset management in its broadest sense: discretionary and advisory, financial and nonfinancial assets (i.e, real estate, commodities, wine and art), conventional, structured and alternative investments.

VI. Advice in all shapes and forms: asset allocation, wealth structuring, tax and trusts, various types of planning (financial, inheritance, pensions, philanthropic), family-dispute arbitration – even psychotherapy to children suffering from “affluenza”.

VII. A wide range of concierge-type services, including yacht broking, art storage, real estate location, and hotel, restaurant and theatre booking.

Why is this important?

According to Scorpio Partnerships Annual Private Banking Benchmark for 2011:

-          Bank of America leads the pack due to its rescue of Merrill Lynch in 2008 and acquisition of US Trust in 2007.

-          Morgan Stanley follows as a result of its ownership control of the Smith Barney Franchise

-          UBS comes in next.

The top four in the world are some distance from the rest of mega-players in the market. For instance, BAC is $1.08 trillion ahead of Credit Suisse which ranks in 5th. Which itself has more than $430 billion more than Royal Bank of Canada (6th).

Sources: Wikipedia, WSJ