Ultra-Wealthy Clients Choosing Boutiques Over Big Firms: Study

Luxury Brand Status Index Wealth Management survey finds that successful wealth managers are relationship builders first, money managers second

Expertise, trustworthiness and generosity are key to relationship building, Luxury Institute CEO Milton Pedraza says. Expertise, trustworthiness and generosity are key to relationship building, Luxury Institute CEO Milton Pedraza says.

 Multimillionaires are leaning toward boutique money managers rather than using larger firms, the latest Luxury Brand Status Index Wealth Management survey finds.

“Wealthy clients tell us that expertise, trustworthiness and generosity are the critical elements in building strong client relationships in wealth management,” said Luxury Institute CEO Milton Pedraza, in a press release. “Successful wealth managers are relationship builders first, and, since few can beat the markets in the long run, money managers second.”

Pedraza also believes that wealthier investors are using more boutique firms because of transparency. “They’re are scrutinizing everyone now, from their lawyers to their doctors," Pedraza told ThinkAdvisor. "There’s a greater influence in being a fiduciary; you’re going to have to put your clients’ needs above your own.”

The Luxury Institute surveyed 506 people with an average net worth of $15 million and annual average income of $800,000 to share detailed opinions of 39 leading wealth firms, including wirehouses and big independent broker-dealers, according to a press release.

Using an LBSI scoring system, the firms were rated from 1 to 10 based on the respondents’ evaluations of firms’ product quality, exclusivity, social status and ability to deliver special client experiences. The top five firms were:

  1. Rockefeller & Co. with an LBSI score of 7.94
  2. Atlantic Trust Private Wealth Management, 7.93
  3. Convergent Wealth Advisors, 7.92
  4. First Republic Private Wealth Management, 7.8
  5. Bessemer Trust, 7.68

The theory that algorithms or robo-advisors will replace wealth management firms or advisors could be true if the client’s needs aren’t met. “When a broker provides no added value, then you’re in trouble," Pedraza said. "However, when the human being gets to know you and you act upon their needs, that can’t be replaced by any type of algorithm.”

Companies whose firms focus solely on the financial aspect of their clients’ lives could see some setbacks. Boutique firms focus on serving clients throughout their lives, Pedraza said.

“Truly personalized services comes from a firm that provides you with 360 degrees worth of service,” he said. “The recommendations you make are not from a template, they are not from a policy book, and they are personalized from a human being.”

---

Check out 10 Luxury Items the Super-Wealthy Must Have (and Insure) on ThinkAdvisor.

Reprints Discuss this story
This is where the comments go.

Related

10 Luxury Items the Super-Wealthy Must Have (and Insure)

Watch out: the cost of these high-end goods goes well beyond the sticker price.