Ultrawealthy ultrahot as a market

NEW YORK — Ultrawealthy clients with investible assets of $40 million to $50 million rapidly are emerging as one of the most coveted segments of the wealth management business.
“There’s a huge effort going on in that space,” said Bruce Holley, New York-based vice president and director of The Boston Consulting Group Inc. “Many of the big players have decided to double down.”
One prominent example is UBS AG, which wants to become the market leader in the ultrahigh-net-worth market by 2015, according
to John Straus, New York-based managing director and U.S. head of private-wealth management for the Zurich, Switzerland-based global powerhouse.
The company is hoping to increase its assets under management for ultrawealthy clients to $250 billion by 2010, more than double last year’s $110 billion figure, he said. UBS plans to build out at least a dozen new offices for ultrawealthy clients across the country over the next two years and increase the number of specialists working with ultrahigh-net-worth clients to 400 by 2010, from 140 today, Mr. Straus said.
“This is the fastest-growing part of our business, and we see an opportunity to do in the U.S. what we have done so successfully in other parts of the world,” he said.
But UBS isn’t the only financial services company taking aim at such ultrahigh-net-worth market leaders as Citigroup Inc. and Merrill Lynch & Co. Inc., both of New York, and Chicago-based Northern Trust Corp.
“Everybody is focusing on ultrahigh net worth,” said Rod Wood, executive vice president of Wilmington (Del.) Trust Wealth Advisory Services. “You’re hearing a lot of firms talk about ‘centimillionaires’ — clients worth at least $100
million.”
Wilmington expects its family-office business, which was launched last summer, to focus on the ultrahigh-net-worth market and to be “a big driver for growth,” Mr. Wood said.
Similarly, Credit Suisse Group is targeting ultrawealthy clients as “a big part of the firm’s global initiative,” according to William Woodson, who last month was named managing director and head of family-wealth management for private banking in the United States at the Zurich-based bank.
Credit Suisse underscored the point recently by hiring away Stewart Brenner from crosstown rival UBS to strengthen its ultrahigh-net-worth presence as the company’s New York-based managing director and regional head of market development for private banking for the Americas.
Growing fast
At Pittsburgh-based Mellon Financial Corp., the market segment of clients with at least $75 million to invest is growing “as fast, if not faster, than the overall growth of the company,” according to Don Heberle, senior vice president and executive director of private-wealth management.
In fact, he said, Mellon’s private-wealth-management group is spending “as much money as we ever have on a single significant project” to enhance its information delivery platform for family-office and ultrahigh-net-worth customers.
And New York-based Goldman Sachs & Co., an increasingly feared competitor for wealthy clients, said last month that it plans to open offices for the first time in California and Florida for its North American trust company.
Although the appeal of targeting extremely wealthy clients is obvious, the market niche also presents plenty of challenges.
For starters, there is intense competition for a limited pool of potential clients.
“One private banker told me, ‘We’re all fighting for the same 50,000 to 60,000 families,’” said Allan Starkie, a partner at New York-based executive search and market research firm Knightsbridge Advisors Inc. “Everybody’s poaching from everybody else.”
And then there are the wealthy clients themselves, who can be demanding, if not outright difficult to deal with, wealth managers say, and who are very well aware of the leverage they have when it comes to negotiating fee rates.
‘Something unusual’
“They’re very sophisticated and demanding,” Mr. Woodson said. “They’re institution-like in their ability to garner pricing concessions and receive the highest level of service.”
Ultrawealthy clients also are “looking for something unusual, especially on the investment side,” said Brian Rivotto, chief executive of Boston-based Rinet Company LLC, a wealth management firm that is wholly owned by Boston Private Financial Holdings Inc. “They certainly don’t want an off-the-shelf retail product.”
A scarcity of qualified talent to meet the growing demand is another industrywide problem and may be the biggest hindrance to UBS’ ultrahigh-net-worth ambitions, said Alois Pirker, senior analyst for Aite Group LLC, a Boston-based research and advisory firm.
“Getting a skilled and well-
connected adviser force in place will prove to be a difficult and lengthy undertaking,” he said. “A well-targeted acquisition could fill this gap and would certainly not come as a surprise.”