The 20 Rising Stars of Wealth Management - 2007 - (Page 6) RISING STARS 20 WEALTH MANAGEMENT ices, unified managed accounts continue to rise in popularity. Brokers and clients both seem to like the efficiency of one account that encompasses multiple holdings or products. Big firms, such as Bank of America—that did not already have a UMA platform at the start of this year, added or upped their offering to compete. Brokerages tout the UMA as a client-centric product that manages various asset classes in a single account. Separately managed accounts, however, are not falling off—assets under management in SMAs are on the rise, according to a January 2007 report by the Money Management Institute, a national organization for the managed account solutions industry. “There is more interest in these accounts (UMAs), but not a lot of interest,” Spectrem’s Tom Wynn noted based on preliminary findings of a study his firm will release next month. He feels there is an opportunity for advisors to educate these investors on the benefits of such accounts. Markets: Subprime Mess The blow up of some very popular hedge funds and bailout of others at large brokerage firms is sure to stir up anxiety, even among the affluent. “Whenever there is negative news it affects people’s investment plans for the coming months,” said Spectrem’s Wynn. We saw this with the Social Security and mutual fund problems over the last few years, he noted. Spectrem conducts a monthly index that measures the affluent investors’ willingness to invest. Whenever these types of events occur, it brings the index down, he added. “What you typically see is the money will go to more safe securities. The affluent retreat to the sidelines and take a wait and see attitude. I’ll bet that’s what we will see here,” Wynn said. But this is only a temporary response, he added. If the fallout from subprime continues, the crisis will blend in with other indicators, like market movements, and the investors will adjust to it. “During the mutual fund crisis, people were very concerned, they sat on the sidelines, then it became a part of the landscape and they move on,” Wynn said. AUGUST 2007 Source: Spectrem Goup THE CHANGING LANDSCAPE Investors Not only are the assets under management skyrocketing, the number of high net worth investors is also growing. The Spectrem Group affluent investor report for 2006 noted that the first time, the number of households with $5 million [not including personal residence] exceeded one million. However, while the overall affluent market size increased, the highest percentages of growth were in the $500,000 NIPR households, while the wealthiest grew slightly less. Those households with over $500,000 NIPR grew from 13.1% in 2004 to 14% in 2005 to 15.3% last year for a total percentage growth over those years of 2.2%. Meanwhile those with $1 million NIPR increased from 7.5% in 2004 to 8.3% in 2005 and to 9% last year and the wealthiest segment, the $5 million NIPR households grew from 0.74%, to 0.93% to 1.14% last year, respectively. Taken together, these wealthier segments—the $1 million and $5 million NIPR households grew 1.9%. Brokers Still with these affluent households growing, client needs are morphing. Various institutions and organizations are capitalizing on the increased interest in full-service, family-oriented white-glove treatment for wealthy clients. Moreover, lots of financial professionals are gravitating towards wealth management these days and there is a need for more education for these new wealth advisors, Keith Gregg, founder and chairman of the Wealth Advisor Institute, said. “Everybody’s scrambling for education,” said Gregg. “There is huge increase (in interest in continuing education) on both the firm level and advisor level,” he added. “Financial professionals want to learn comprehensive wealth management skills.” His organization aims to create a network of high-net-worth oriented financial professionals and provide them with the education and resources to execute well-rounded wealth management practices. Besides education, creating and maintaining a close and trusting relationship with the client is still a keystone of the wealth management business. Certain hallmarks of ultra-rich client service remain constant—understanding an individual or family’s unique needs, availability, and sound investment decisions coupled with proven results from financial advice are what earn and keep clients. Brokerages As the industry shifts from transaction-based earnings to fee-based serv6 WEALTH MANAGEMENT RISING STARS Countries With Most Appeal for International Investing
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