Business with the super-rich is extremely lucrative for asset managers. But how fast this segment is growing is often underestimated, as a top US manager at UBS points out.
In addition to the growth market of Asia, UBS is currently focusing on its business with wealthy US private clients. After all, the United States is the largest wealth management market in the world, with no other country home to more multimillionaires.
This year, the Swiss bank acquired advisory teams from Merrill Lynch, First Republic, recently acquired by JPMorgan, and Wells Fargo, among others, to expand its roster of advisors to the super-rich.
Many advisors joined after Credit Suisse announced its acquisition in March. The recruitment drive stands in stark contrast to the drastic cost-cutting course UBS will take after acquiring its former rival.
Mostly Underestimated
John Mathews, head of private wealth management for the Americas at UBS Americas, believes the current opportunities for financial planners may be underestimated. «We happen to be in a business where our underlying client base is growing faster than we are as an industry,» he says in an interview with the online portal «Financial Planning» (registration required).
UBS focuses primarily on wealthy and ultra-wealthy clients, he says. Yet the group of millionaires is not growing as fast as the number of people with assets of $100 million or more.
Mathews said that especially in Private Wealth, the unit that looks after ultra-high net worth individuals, assets will continue to grow by more than 10 percent annually, he conservatively estimates.
The Complete Package
The trend of the wealthy getting richer accelerated after the financial crisis due to quantitative easing of US monetary policy and very low-interest rates, he says. The $100 million client segment is expected to grow by 10.5 percent over the next five years, while the million-dollar client segment is expected to grow by only about 5 percent. That's been going on for ten years and accelerating, Mathews says.
To attract as many of these clients as possible, he says UBS has focused on retaining the best financial advisor teams and all the support services and strategies that come with them. «So it's not just only about the advisor. It's about having the right support functions,» he emphasizes.
These might include trusted estate attorneys or specialists who focus on philanthropy, private equity, or hedge funds.
The Great Wealth Wave
Mathews also comments on the «great wealth transfer,» the impending inheritance of large sums of money. He estimates that at least $18 trillion will pass from one generation to the next over the next seven years. It's a wealth wave of sorts, he says because baby boomers control about 60 percent of the wealth in the United States.
The UBS executive also senses growth opportunities. Some clients come with the advisors you hire, he said. But most UBS advisors get their new clients through referrals from existing clients, he said. «It's really not a cold-calling business anymore. It's all done through introductions.»
