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October 27, 2002 at 07:00 PM
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Seventy-eight percent of registered investment advisors serving affluent clients are wealth managers rather than money managers or market timers, finds a new study by the Financial Research Corporation, Boston.
FRC defines wealth managers as advisors who do comprehensive financial planning for clients, sometimes with the aid of allied financial specialists who complement their financial expertise.
In contrast, money managers and market timers are mostly concerned with managing portfolios and assets for individuals as well as institutions.
Nineteen percent of the studied firms were money managers and 3% were market timers.
The RIAs in the study managed a total of $974 billion, of which $728 billion were in accounts over which the advisor had investment discretion, and the remainder were in accounts over which the clients retained investment discretion.
Wealth managers controlled 73% of all high-net-worth advisors assets, followed by money managers with 25%, and market timers with 2%.
“Wealth managers are applying various aspects of the traditional family-office model to meet the needs of multiple affluent families, whether they are technically a family office, according to the FRC study, entitled “The 2002 Advisors to the Affluent Report.”
“The family office model traditionally is offering full complement of investment services to one extended wealthy family,” says D. Christopher Brown, a consultant who wrote the report. “A lot of wealth managers have taken it and applied it to many different families–theyre not just working for one family.”
Brown explains that some wealthy families have their own offices, complete with a financial advisor, tax attorney, and accountant dedicated to the familys needs. In a way, wealth managers can become a means for wealthy families to outsource the family office. For well-to-do families not affluent enough to have their own family office, this is a practical solution, Brown notes.
