Despite the past decades serving several global economic shocks, creating vast uncertainty, the global Ultra High Net Worth (UHNW) population was tipped to experience growth of 27% between 2019 and 2024 (Knight Frank’s Wealth Report, 2020). Even in the backdrop of the COVID pandemic where economies have been crippled, billionaires increased their wealth by 27.5% (UBS Campden Family Office Report, 2020) exemplifying the unique wealth profiles of the ultra-wealthy.
The UHNW market has always been attractive, but with the sufficient wealth and sophistication, the UHNW population have also been willing and able to manage their own money, and the continued, rapid rise in the number of Family Offices (FO) globally is reflective of this. However, the continued low interest rate environment driving a more diversified investment strategy is placing much greater strain on the investment capabilities of the FO, and combined with ever increasing regulatory scrutiny, the traditional FO construct is perhaps not as cost effective as it once was.
Many existing operating models are not capable of delivering the desired access to diversified and complex investments, nor meet the demand for more sophisticated investment solutions, and are struggling to keep pace with growing regulatory requirements. With the required cost of investment to address these issues high, the FO market is evolving and looking for alternative ways to develop and augment their operating models to meet the new requirements.
Wealth Managers to date have more successfully served the Affluent and HNW, but an increasingly saturated and highly competitive market undergoing technology disruption is leaving Wealth Managers on the lookout for alternative growth markets. The growth and evolution of the UHNW and FO space has therefore, unsurprisingly, attracted the attention of a broad range of market participants. Increasingly, Wealth Managers and Private Banks are developing a range of new offerings, partnerships, and acquisitions, looking to deliver an offering that can help meet the changing needs of these valuable clients and capitalise on the opportunity this presents.
Recent examples include:
- Coutts recent launch of Coutts Family Office will bring together recent partnerships with BlackRock, fin-tech Flagstone and others from within the Natwest Group to provide a dedicated, consolidated touchpoint for Family Office clients
- Citi unifying their Global Wealth Management Business to make it a key differentiator and source of enhanced returns and the new business model is focused on newer, larger and more sophisticated UHNW clients
- Schroders further building on Cazenove’s UHNW offering with the acquisition of Family Office specialist Sandaire
What challenges do Wealth Managers need to overcome to succeed in the UHNW and FO market?
Whilst the attractiveness of an UHNW client is clear, winning their business may not be as straightforward and the UHNW and FO market still presents a number of challenges to a prospective Wealth Manager.
Overall, the UHNW market is more sophisticated, better informed and very willing to shop around. As a result, it is a highly competitive marketplace and it is common for UHNW and FO clients to have multiple relationships. To win their business, Wealth Managers must have a clear strategic proposition that can offer a differentiated and valuable service.
2. Client Service
An UHNW relationship is often a complex one with multiple touch points and increasingly high expectations. To avoid a high touch and high cost service model, firms must leverage technology to seamlessly deliver an enhanced client experience that effectively delivers the required expertise to differentiate the offering.
UHNW clients bring with them a higher level of client and product risk. The increased complexity of an UHNW account increases Know Your Client & Anti-Money Laundering risk and with it an additional operational burden. Equally a diversified and riskier product set in search of more meaningful returns creates suitability concerns. An effective control framework seamlessly integrated with a multi-faceted investment capability is required to avoid a cumbersome and costly operation.
Whether you are looking to acquire a Family Office, set up a new UHNW offering or organically grow a UHNW business arm, Alpha has a wide range of capabilities to support your journey to access and service the UHNW market. We can facilitate the definition of your strategic vision, capitalise on existing CRM, Data & Technology, optimise Operating Models (Pre & Post merger), and deliver the required Control Frameworks & Digital technologies to support best in class solutions.
Alpha has rich experience working with over 350 clients globally and 35% of the UK Wealth Market by AUM. We bring a unique blend of technical knowledge, industry experience, and accelerators that mean our clients can be confident we will deliver value against their objectives.