The Constantly Evolving World of Wealth Management and Wealth Managers

Wealth Management…What Exactly Is It?


First things first, let’s kill any notion that wealth management is simply a professional service that provides high-level financial and investment advice. Of course, it does this but only in the context of a holistic, all-encompassing approach to each client’s financial life. Wealth management brings together an array of different disciplines to complement and inform investment advice, most particularly accounting and tax services, legal and estate planning, wealth protection, retirement and succession planning and when required, family governance. By managing the entire financial lifespan, wealth managers assist in growing, preserving and protecting wealth, ensuring it is passed onto the family in a tax-efficient manner and in accordance with each client’s wishes.

Wealth management clients tend to range from affluent to high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals and families. As the sector has evolved and developed in terms of complexity, so the key advisory role played by wealth managers in the consultative process has become ever more fundamental to the development of individually tailored strategies. Wealth managers are specialised financial advisors who offer a high-level professional service, often but not always, charging a flat fee for financial and investment advice. Sometimes they will work under an ‘assets under management’ or AUM arrangement where, very simply, clients are charged an annual percentage (usually around 1%), of the assets they have under management. Both fee structures have merits and disadvantages, but however wealth management services are charged, advice must always be holistic.

Almost as diverse as the advice offered by wealth managers is the variety of companies these professionals work for, ranging from large corporate entities right through to independent financial advisors and portfolio managers. Many large banks, asset managers and brokerage houses sell both their own (proprietary) and others (non-proprietary) products and services to investors. Complementing this, independent wealth managers work in partnership with banks, brokerage firms and their advisory professional contacts or talent pools to cater to the needs and manage the full range of their HNW client’s holdings. They say variety is the spice of life and in the world of wealth management every client has a plethora of choices about where and with whom they entrust their often-hard earned money.

What Are The Origins Of Wealth Management?

Seedlings in Pot

Whilst the term “wealth management” has come into increasingly common use in recent years, it first seems to have appeared nearly ninety years ago in 1933, the year the Glass-Steagall Banking Act was passed in the United States separating commercial and investment banking. Together with the Securities Exchange Act which followed in 1934, a strict regulatory framework had been put in place that lasted until the 1980’s and 1990’s when, with de-regulation, the term finally came into more general use, particularly in the Private Client divisions of banks such as Goldman Sachs and Morgan Stanley. At the time these firms were keen to distinguish the services their divisions provided from more mass-market offerings. Ultimately, they have had to find other means of making this distinction, as the use of the term “wealth management” has steadily proliferated throughout the financial services industry in recent years.

Of course, just because the terminology was only coined in the last century it doesn’t mean the concept didn’t pre-date it! In its purest form wealth management is a concept based upon the accumulation and retention of as many resources as possible. Millennia ago, those with an abundance of food would have been considered wealthy, those without poor and of course hungry! It’s as simple as that, but as time has passed the diversity of resources that can be accumulated has diversified to an almost unbelievable extent.

By ancient Roman times Senators were hiring financial advisors from the rapidly growing equestrian class to lend out and manage their wealth. Indeed, as the equestrian class itself grew it produced many wealthy businessmen such as brokers, miners and exporters who also needed assistance with the management of their newly built fortunes. It’s clear to see that over 2000 years ago the wealth management industry and wealth managers were key elements in the smooth running of the Roman Empire!

The Emergence Of Swiss Banks

Swiss Mountain Peaks

Fast forward to the 19th Century and specifically the 1815 Congress of Vienna which formally established Switzerland’s international neutrality, and we can see Swiss Banks rapidly rising to prominence in the world of wealth management. The ruling class in Switzerland sought to play on the contradictions between the major European powers and protected by their shield of neutrality decided their principal arm would be finance. Consequently, they welcomed a large influx of capital from across Europe into the secretive banking system and to this day, over 200 years later, Swiss banks still feature prominently in the top 10 investment firms in the world. They are behemoths in the world of wealth management as will be seen later in this article.

How Does Wealth Management Work?


In simple terms a wealth manager will sit down on a one-on-one basis with each client and using a consultative process will learn exactly what they are looking to achieve. Together, advisor and client will explore the client’s goals, establish where they are on the comfort scale regarding risk and acknowledge any other specific requirements or concerns regarding the investment of the client’s assets.  Once a full picture has been obtained, the wealth manager will then work to deliver a bespoke strategy that will almost certainly employ a range of financial services and products.

Having implemented this strategy, the wealth manager will then meet regularly with the client to review progress and, where appropriate, update goals.  The portfolio of investments will probably be rebalanced from time to time and there will also be an ongoing review process to determine if and when any additional services are required. If they are, the wealth manager will co-ordinate input from both outside experts and at times from the clients own retained professionals such as lawyers and accountants.

Together, all parties will look to develop the best, all-encompassing strategy for the client, one which may also include advice on private banking services and even philanthropic activity. Ultimately, whether wealth managers provide services right across the financial spectrum or are specialised through their companies into specific areas, the goal is the same. By doing a good job, the wealth manager and his firm will look to retain clients over many years, perhaps even a lifetime.

How Has Covid-19 Impacted Working Practices?

 Happy Lady on Zoom Meeting

Interestingly, with the enforced move to remote working since the Covid-19 pandemic first struck, wealth managers have been forced to take to their mobile phones or screens and in so doing utilise resources such as Teams and Zoom. By maintaining good communication at a time when many clients have been more anxious than normal about their portfolios, it’s interesting to note that many experienced wealth managers believe the impact of the pandemic has given rise to enhanced client relationships. By accelerating change in the wealth management industry Covid has encouraged advisors to have an even more personal approach with clients.

One particularly noticeable change to anyone with a Linked in account, is the way in which wealth managers have upped their game in terms of their digital client interface. The ability to connect, inform and communicate with clients via digital channels has become more critical than ever. Many wealth managers have committed strongly to social media sharing market views and investment ideas through blogs, podcasts, regular posts, video presentations and much more besides. Even social platforms such as WhatsApp, WeChat, Facebook and Twitter have been heavily utilised. 

At a time when advice is most valuable and can have the biggest impact, namely when economic circumstances are at their hardest and most trying, wealth managers have embraced technology as never before. Of course, many have seen the twin forces of globalisation and digitalisation already driving innovation and change but it’s fair to say the pandemic has dramatically accelerated this process. An interesting by-product of this digital revolution is that it will increasingly call into question the value of lavishly appointed wealth management offices and any first-class travel by their occupants! The fact is that customised services are now being provided at much lower costs. Even signing up new clients is easier with digital on-boarding, allowing many firms to sign these new clients without the need for a wet signature!

How Can Wealth Management Firms And Wealth Managers Become Even More Effective?

Industrial Machinery

As evidenced above, an industry that was historically seen as a little staid and set in its ways in the past, has been shaken out of any complacency by the events of the last 10 years or so. Starting with the global financial crisis of 2008/09, many wealth management companies underwent significant changes at the start of the last decade. Many business models were re-engineered to incorporate lessons learned from mistakes made at this time. The big positive from this period is that good wealth managers and firms were able to strengthen their credibility with their clients, becoming an even more trusted resource.

Furthermore, as the global markets bounced back, and emerging markets grew at pace HNW and UHNW numbers rocketed and accumulated global wealth soared and so of course did the demand for quality wealth management services. The decade after the credit crunch has seen huge technological advances. Consequently, as demand for their services has grown wealth managers have had to embrace new technology, including artificial intelligence (AI), enhanced software packages, revolutionised communication tools and more efficient and accurate analytics and congnitive tools. Those that create the best digital infrastructure will obviously become more effective.

Re-Imagining The Business Model

Solar Panels

Given the above its little wonder that a majority of wealth managers feel that keeping up with new technology is the biggest challenge they face! With smartphones giving instant access to a variety of products and services and a younger clientele for wealth management services that are incredibly tech-savvy, the challenge for wealth managers is clear, staying relevant to their often-younger customers! Advisors and their firms must rise to all the aforementioned challenges, but the signs are good, and the impact of Covid-19 has, in many senses, been very positive for the industry.

With rising demand for wealth management services, both wealth managers and their firms can benefit massively from leveraging digital technology and maximising it to each client’s advantage. Advisors will need to regularly update their skill base and many will find digital experts joining their team and becoming invaluable colleagues and contributors to their firms overall proposition. Engagement tools will be subject to a continual process of improvement and should in theory lead to greater efficiencies and even potentially lower client fees. Having previously mentioned artificial intelligence, another development in this area is so called Robo-advisors. Significant volumes of assets are now being managed by automated technology, but once again it seems likely this innovation will complement the personalised and bespoke advisory services offered by wealth managers, rather than replacing them!

One trend that does seem likely to gain greater traction in the years ahead is a move towards a more integrated approach to wealth management, one that includes housing, property-related and other assets. Whilst a “one-size-fits-all” approach will clearly never work in wealth management, a “one-stop-shop” has inherently more appeal and may be key to the retention of clients in the long-run. It will be interesting to see which wealth management firms seek to expand their services in this way and which look to keep a more purely investment focussed model.

What Is The Difference Between Private Banking And Wealth Management?

Young Family under a Tree

Having reviewed the way in which business models are changing now seems like a prudent moment to clearly differentiate between private banking and wealth management. Whilst the two terms substantially overlap there are subtle differences which set them apart. Generally speaking; wealth management is a broader category that can be practiced on a portfolio of any size whilst private banks tend to focus on high-net-worth (HNW) individuals and families, for whom they also provide financial management and banking services such as cheque cashing and transfers. Banks offer their HNW clients a broad range of concierge-like service with access to a variety of employees, albeit high staff turnover can be an issue across these banks.

In contrast to the private banks, dedicated investment firms and brokerages have a much narrower focus. They cannot offer a range of banking services but might well claim to be masters of one service - investments, rather than a jack of all trades.  They would probably also point out that private bankers are employees, so their first loyalty is to their employer not their clients.  Some of the biggest and best wealth management firms outside of the private banks are also often referred to as asset managers.

Who Are The Biggest Wealth Management Firms/Asset Managers?

Guernica Pablo Picasso

Offering investors access to professionally managed, diversified portfolios through a diverse range of funds, the biggest firm is BlackRock Financial Management, with a great reputation for sustainable and environmentally responsible investing and a whopping $7.43 trillion of assets under management (AUM). Only launched in 1988 it is now the world’s largest investment management firm with over 800 funds. Tucked in behind BlackRock come The Vanguard Group, founded in 1975 by John C. Bogle, who now have over $6.2 trillion AUM for over 20 million clients across 170 countries. Their S&P 500 Index fund is particularly popular.

Completing the big five industry players are Fidelity with $3.3 trillion AUM, over 32 million customers and around 400 mutual funds, Pacific Investment Management Company with just over $2 trillion AUM and over 775 investment professionals, with an impressive average 14 years of investment experience each and Invesco Limited with over $1.2 trillion AUM and over 8,000 employees in 25 countries. The figures for these firms are accurate as of late 2020 and interestingly all the companies are US based, albeit with a global reach.

Which Are The Biggest Private Banks In The Wealth Management Sector?

Gold Ingots

In 2020 the ADV Ratings show that the world’s top private bank wealth managers, have nearly $10 trillion of combined assets under management (AUM).  Interestingly this top 10 includes six US banks and three Swiss financial institutions. UBS Group tops the list with AUM of $2.6 trillion in global wealth management. UBS are the largest wealth manager in the Asia Pacific region with around 24,000 employees worldwide. Their Global Wealth Management (GWM) division provides high-quality private banking and wealth management products to HNW’s and families worldwide. Below UBS come another Swiss bank, Credit Suisse with $1.25 trillion of AUM.  Credit Suisse achieved wealth management revenues of $15.2 billion in 2019 underlining once again the sheer magnitude of the wealth management market.

Below the top two Swiss Banks comes the first US Bank, Morgan Stanley with AUM of $1.24 trillion. Through a network of over 16,000 financial advisors Morgan Stanley serves 3.6 million customers worldwide. Bank of America ranks fourth on the list with $1.2 trillion of AUM. The Global Wealth & Investment Management (GWIM) division comprises two main business lines; Merrill Lynch Wealth Management and Bank of America Private Bank. Merrill Lynch Wealth Management alone has over 14,000 financial advisors. In fifth place comes a third American bank in JP Morgan with $677 billion of AUM. JP Morgan employs specialists who are focused on investing, banking, lending and trusts and estates and are clearly looking to provide the comprehensive “one-stop-shop” approach mentioned in the section above.

Places six to 10 are occupied by Goldman Sachs ($558 billion of AUM), Charles Schwab ($506.3 billion of AUM), Citi Private Bank ($500 billion of AUM), BNP Paribas Wealth Management ($424 billion of AUM) and Julius Baer ($423.5 billion in AUM). Many of these leading institutions look to provide a truly holistic approach to managing wealth from financial planning, wealth structuring, retirement, taxation succession, relocation, philanthropy and even in some cases insurance needs. All seem to realise the real value of an integrated approach for their clients, with Goldman having developed a Wealth Advisory Group, Charles Schwab having set up a Schwab Private Client team, Citi Private Bank maintaining an extremely high ratio of advisors, BNP maintaining a team of investment strategists and Julius Baer working with a broad network of external experts.

An Enhanced Focus On Environmental, Social And Governance (ESG)

Eco Plants

Many wealth managers and advisors at the above banks and investment firms have for several years now seen sustainable investing through ESG principles as a “nice to have” but have been unconvinced by its durability in the face of a crisis. They were waiting for a serious test of sustainable investing and then Covid-19 arrived! The positive news is that sustainable investments have delivered higher and more stable returns than many conventional equivalents as well as more resilient flows. Little surprise then that a large majority of wealth managers have indicated that they are either continuing, or in many cases increasing, their focus on sustainable investing as the Covid-19 crisis rumbles on.

Of course, the focus on ESG varies enormously across wealth management firms, but it is interesting to note that some firms have started to build a respective thematic offering for their clients – a great way for the financial sector to start earning its social licence to operate! Plenty of wealth managers are closely following the creation of ESG industry standards and favouring investment in thematic and long-term growth trends many of which have an ESG aspect such as healthcare and technology. Once again it seems that the wealth management sector has derived many more positives than negatives from the current pandemic!

The Future Of Wealth Management

Open Hands full of Grain

In conclusion, 2021 finds a growing army of investors who can choose from a virtually limitless array of companies, products and funds, with more data and tools at their fingertips than ever before enjoying unprecedented levels of accessibility. All this choice however can be somewhat confusing. Having access to limitless data doesn’t necessarily mean that you can understand it! Thus, the role of a trusted, empathetic, and experienced professional wealth manager would still appear to be as relevant today as it has always been, perhaps even more so.

Whilst some industries have been hugely damaged by the impact of Covid-19, it is somewhat ironic that one which was often considered somewhat unresponsive and staid has stepped up to the plate and turned the pandemic massively to its advantage. Progress in the wealth management industry in the last year has been staggering. With the top 5 institutional asset management firms and the top 10 private banks managing a staggering combined figure of around $30 trillion and with increasing demand, the future is now very bright indeed.

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