2011 Top Wealth Managers: Services Offered, Prices Charged

Perhaps the variability in pricing is a function of the investment approach of the firm. The vast majority of firms use mutual funds as the primary investment vehicles for their clients (see chart below). Much of the client assets are also invested in index funds and ETFs. 

(Click here to enlarge chart)

For some of the firms, this is clearly the investment philosophy of choice. On average, only 20% of the client’s assets are invested in individual securities (i.e.  are being managed by the firm). Larger firms show a higher propensity to manage assets internally.                  

Thirty-four percent of the respondents do not have an investment research department. This decision is very size dependent with 46% of the smallest firms lack an investment department versus only 6% of the largest firms. The majority of investment departments focus on managing portfolios of mutual funds. Only 14% of all firms focus on managing assets and generating “alpha”–return above the benchmark rate.

The majority of firms pursue an active style of management: 60% of the largest firms, 47% of the midsize firms and 56% of the smallest firms. What is interesting is that many of the firms have both active and passive portfolios. About 30% of the largest firms, 41% of the midsize firms and 25% of the largest firms follow this approach, perhaps combining passive management in core asset classes with more active approach in “satellite” asset classes.

The financial crisis of 2008 and 2009 forced every firm to articulate how it reacts to changes in the market and macro-economic news. The temptation is high to manage client assets more actively and respond to the changes in the overall climate. Sixty percent of the largest firms, 47% of the midsize firms and 53% of the smallest firms react to the market as they see opportunities and threats. All participating firms continue to focus on strategy but it seems that the majority of firms are not comfortable with just accepting the market risks and talking clients through it.

Finally, creating a formal, written financial plan has become a relatively rare
service. Only 26% of the largest firms, 31% of the midsize firms and 13% of the small firms create financial plans. Considering that the roots of the wealth management movement are in the financial planning movement, it is somewhat ironic to see that the firms have moved away from creating formal financial plan documents.

See part three of our special report on the findings of the 2011 Top Wealth Managers Survey.

Return to our 2011 Top Wealth Managers home page for further analysis and data.