A Tale of Two Millionaires: - Managers of Wealth

Financial Services Practice
A Tale of Two Millionaires:
The Best of Times for
Private Banks to Look Beyond
The Ultra-High-Net-Worth Market

A Tale of Two Millionaires:
The Best of Times for
Private Banks to Look Beyond
The Ultra-High-Net-Worth Market
Introduction
1
How Private Banks Are Navigating Choppy Waters
5
Looking Beyond Ultra-High-Net-Worth Clients
9
Crafting a Core Millionaire Offering
15
Issues for Management Teams to Consider
23

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
1
Introduction
Private banking has long been one of the most
attractive and rewarding businesses in financial
services – a rarified world where elite bankers serve
as trusted advisors to wealthy clients and their
families, providing them with customized solutions
to a myriad of complex financial issues and the
ultimate in personal service. Traditionally, private
banks have focused on high-net-worth individuals
with a minimum of $10 million in investable assets
and often significantly more substantial levels of
wealth. This focus intensified over the past decade
as private banks invested in an array of specialized
capabilities and teams of well-compensated
professionals from relationship managers to
specialists in customized investment strategies, tax
and estate planning and advisory services in art
and philanthropy.
Having steadily taken their business models up-market, however, private
banks risk neglecting one of the largest growth opportunities of the next
decade: the “Core Millionaire.” Core Millionaires, who have between $1
million and $10 million to invest, have often been served only as an accommodation
or in the hope that their assets will grow. These 4.2 million

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A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
households include doctors, lawyers, engineers, successful small to mid-size
entrepreneurs and frugal savers who have different needs than the ultrahigh-net-worth
(UHNW) segment with $10 million or more in assets. They
are more concerned about wealth preservation and retirement than philanthropy
and legacy issues. In the coming years, they will also be the fastestgrowing,
largest and most profitable segment of the wealth market. The Core
Millionaire segment:
• Accounts for 27 percent of the typical private bank’s assets today, but
will generate nearly two-thirds of the asset growth in wealth management
by 2015.
• Represents the acquisition “sweet spot” for private banks, as
high-net-worth clients who are considering financial advisors for the
first time.
• Delivers revenue margins two-to-three times the average for the UHNW
segment at a lower cost-to-serve.
• Generates a higher proportion of business in profitable deposit, lending
and discretionary investment products than the UHNW segment.
• Will generate over 80 percent of all net new revenue growth in wealth
management by 2015.
For many institutions, focusing on Core Millionaires will require a fundamental
shift in how they provide private banking services, because private
bankers often indulge this segment with the customized personal service
intended for UHNW clients.
In order to profitably serve Core Millionaires,
private banks need to create a multifaceted
product and service line that offers
value, but can be delivered at lower cost.
In particular, banks need to address three
imperatives:
• Develop an integrated investment and banking experience that feels
customized, but offers standardized packages of services that meet
the typical needs of Core Millionaires.
In order to profitably serve Core
Millionaires, private banks need to
create a multi-faceted product and
service line that offers value, but can
be delivered at lower cost.
• Design solutions for specific segments of the Core Millionaire market,
for example, entrepreneurs in selected industries, professionals or retirees
with wealth preservation and income goals.

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
3
• Implement a disciplined and profitable service model – providing
services centrally, increasing the coverage and productivity of
bankers and account managers, offering selective tax and estate
guidance as required, and enforcing pricing discipline.
Despite market uncertainty, the outlook for private banking over the next
decade is strong, but growth will come from new client segments with different
needs. Private banks that are able to adapt their business models to
serve not just the UHNW market, but also Core Millionaires, will find ample
opportunities for profitable growth.

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
5
How Private Banks Are
Navigating Choppy Waters
During the pre-crisis bull market, private banks
enjoyed tremendous growth and welcomed clients
below their stated minimums. Although private banks’
business models were geared to serve clients with
assets above $10 million, the high profits from rapid
market growth obscured structural issues in the
service model for the lower end of the wealth market.
In the wake of the financial crisis, wealth managers, including U.S. private
banks, experienced a dramatic reversal. Not only did private banking
asset levels fall sharply – 25 percent over the course of 2008 – but
average profit margins contracted from 35 basis points in 2007 to 24
basis points in 2009.
Despite efforts to improve profitability since 2008, private banking continues
to face challenges. Results from McKinsey’s Global Private Banking
Survey show that asset gains in 2009 and 2010 came entirely from market
appreciation and that net new
asset flows from clients were
negligible (Exhibit 1, page 6).
Asset gains in 2009 and 2010
came entirely from market
appreciation, and net new asset
flows from clients were negligible.
Additionally, many clients have
changed their asset allocation
strategies since the crisis and
shifted toward asset classes with lower fees. McKinsey’s benchmarking
results show that the proportion of equities and alternative investments
in private banks’ managed assets, which dropped from 54 percent to 36
percent in 2008, recovered only partially to 45 percent by 2010. More-

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A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
Exhibit 1
Private banking net flows have been flat over past 2 years
Net flows by wealth manager category
Percent change
2009
2010
Private banks
0.8
0.4
Wirehouses
-1.6
-0.8
Discount brokerages
8.0
3.5
Independent advisors
6.1
5.8
Source: McKinsey 2011 Global Private Banking Survey
over, banking and lending revenue – critical to the profitability of most private
banks – has suffered in the recent low-interest rate environment.
Consequently, the industry profit pool has dropped about 50 percent below
its pre-crisis peak (Exhibit 2).
Not only has the level and growth rate of private banks’ profits declined, the
post-crisis environment has also exposed fundamental weaknesses in the industry’s
business model – in particular, the high cost of serving clients at the
lower end of the wealth market.
The decrease in managed assets was not entirely involuntary. In reaction to
the financial crisis, some private banks moved to improve their profitability by
focusing on the UHNW segment, with the goal of reducing their average cost
of service. Some institutions proactively stopped serving clients at lower
asset levels, so that industry benchmarking for both 2009 and 2010 shows
net outflows among clients with less than $10 million in assets. These were
offset by inflows from clients with over $10 million in assets (Exhibit 3).
Today, private bankers are skeptical about their ability to recapture momentum
in growth. In McKinsey’s 2011 Private Banking Survey, just one in five
banks surveyed believed that acquiring new clients would contribute significantly
to near-term revenue growth. Instead, they expect to rely on market
appreciation and pricing. To some extent, these low expectations reflect the
defensive posture of the industry following the crisis, as well as increased

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
7
Exhibit 2
Total private banking profits are down by over 50% since 2007
Average assets
Indexed at 2007
100
76
67
70
-30%
Revenues
Indexed at 2007
100
73
63
67
-33%
Costs
Indexed at 2007
100
81
76
81
-19%
Profits
Indexed at 2007
100
64
47
49
-51%
2007
2008
2009
2010
2007
2008
2009
2010
2007
2008
2009
2010
2007
2008
2009
2010
Source: McKinsey 2011 Global Private Banking Survey
Exhibit 3
Private banking client mix has shifted toward UHNW households
over past 2 years
Private banking asset growth by wealth band
Percent change
Assets
2009
2010
$30 million +
10.0
5.1
$10-30 million
11.7
4.0
$1-10 million
-0.4
-2.9

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
9
Looking Beyond
Ultra-High-Net-Worth Clients
Private banks that build a business model that effectively
courts and profitably serves Core Millionaires
will be well positioned to generate profitable growth.
Several factors argue for more strategic attention to
this segment of the wealth market.
• The predominant source of new wealth. While only 27 percent of current
private banking assets come from households with $1 million to
$10 million in investable assets, the Core Millionaire segment already
holds a large slice of U.S. household net worth and is expected to account
for 60 percent of the asset growth among individuals with over
$1 million in assets through 2015 (Exhibit 4, page 10).
• Acquisition sweet spot. Private banking clients, especially UHNW
clients, tend to skew disproportionately toward an older demographic.
Overall, fewer than 15 percent of private banking clients are under 40.
McKinsey’s interviews with clients and bankers suggest that those
who inherit UHNW estates are more likely than ever to seek new financial
advisors, rather than rely on their parents’ bankers. Long-term
success will therefore require building relationships with Gen X and
Millennial clients, who are in the market for wealth management services
for the first time. These clients typically enter the market at the
lower end of the $1 million to $10 million in assets range and are
much easier to acquire at the point of entry than after they have developed
a relationship elsewhere.
• Higher investment fee income. Core Millionaires, with $1 million to
$10 million in investable assets, are large enough to justify relationship
banking but do not have the pricing leverage of the wealthiest

10 A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
Exhibit 4
From 2011 to 2015, Core Millionaires are projected to create nearly
twice as much net new wealth as UHNW households
U.S. onshore personal financial assets
(PFA) by wealth band
$ trillion
31.1
PFA growth,
2010-2015
$ trillion
PFA growth,
2010-2015
Percent total
26.0
24.7
25.7
23.3
5.3
20.8
4.7
5.0
5.2
4.1
10.3
9.1 9.7
10.1
8.0
26.8
5.5
10.6
6.5
12.5
Ultra-High-
Net-Worth
>$10 million
Core
Millionaires
$1-10 million
10
>30
28
38
10-30
51
Core
Millionaires
1-10
2.5-10
72
85
1-2.5
107
Source: McKinsey 2011 Global Private Banking Survey

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
11
families. McKinsey’s research shows that the industry average ratio of
revenue on client assets (ROCA) is 85 basis points for Core Millionaires
versus an average of 38 basis points for UHNW clients (Exhibit 5).
Moreover, private banking clients with less than $10 million in assets
usually expect their private banker to directly manage their assets. On
average, less than 5 percent of Core Millionaires’ assets are held in
custody, compared to 25 percent to 30 percent of UHNW clients’ assets.
Custody assets typically have revenue margins under 10 basis
points and sometimes much lower.
• Greater use of lending and deposit products. McKinsey’s 2011
benchmarking reflects the important link between banking product
penetration and overall revenue margins. In top-quartile private
McKinsey’s Global Wealth Sizing
McKinsey & Company’s proprietary Global Wealth Distribution
database provides current and future projections of high-net-worth
assets. The firm’s sizing of the global high-net-worth market includes
detailed projections for all regions and over 50 markets (both onshore
and offshore assets). Among the highlights for 2011:
• Total onshore assets of U.S. high-net-worth households will
increase by $3.7 trillion over the next four years, with 955,000 net
new households having at least $1 million to invest.
• Financial assets of high-net-worth individuals have grown over
24 percent annually since 2008 in Asia (excluding Japan) and are
expected to increase at a rate of approximately 19 percent over the
next four years.
• Despite faster economic growth in emerging markets, over 40 percent
of the world’s millionaires reside in North America, and a large
majority of their assets are onshore.
• Among major regions, Latin America has the highest concentration
of wealth in ultra-high-net-worth households with $30 million or
more in assets – representing 32 percent of total personal financial
assets compared to a global average of 15 percent.

12 A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
Exhibit 6
High yields on Core Millionaires are driven by attractive product mix
Composition of U.S. private banking client assets by wealth band
Wealth band
$ million
Share of assets
Percent
Managed
assets
Non-managed
assets
Deposits
Loans
Ultra-High-
Net-Worth
>10
>100
47
42
6 5
30-100
59
21
10
10
10-30
67
11
11 11
Core
Millionaires
1-10
2.5-10
67
6
12
14
1-2.5
65
3
15
17
Source: McKinsey 2011 Global Private Banking Survey
Exhibit 7
Through 2015, new revenue pools created in the Core Millionaire
segment will be quadruple those created in the UHNW segment
Wealth band
$ million
Net new revenue pool 2010-2015
(at current private banking revenue margins)
$ billion
Group
total
Ultra-High-
Net-Worth
>10
>30
1.9
5.0
10-30
3.1
Core
Millionaires
1-10
2.5-10
10.6
20.4
1-2.5
9.8
Source: McKinsey 2011 Global Private Banking Survey

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
13
banks, deposits and lending products accounted for over 55 percent
of total revenue, compared to 35 percent for their bottom-quartile
peers. Core Millionaires
can be important to boosting
profits, since they are
more likely to require
credit and cash management
services. On average,
lending and deposit
products represent 28 percent
of total account balances for Core Millionaires, twice the average
for wealthier families (Exhibit 6).
On average, lending and
deposit products represent 30
percent of total account balances
for Core Millionaires, twice the
average for wealthier families.
Overall, the incremental revenue opportunity from the Core Millionaire segment
is more than four times larger than from UHNW clients (Exhibit 7).

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
15
Crafting a Core
Millionaire Offering
Private banks should take a page from the luxury retail
playbook and begin to think about their traditional
offering for the UHNW market as a high-end brand –
necessary, but not sufficient, for success. Private banks
could introduce the equivalent of complementary
brands to profitably serve Core Millionaires.
Tiffany & Co. serves as an instructive example. At the time of its 1987 IPO,
the jewelry chain had eight stores and was almost exclusively focused on
selling high-end jewelry. Starting in the mid-1990s, Tiffany began to develop
sterling silver and gold items priced below $1,000. Today, these
products drive nearly $1 billion in annual sales and represent almost onethird
of the company’s overall revenue. Tiffany has bifurcated its sales
model to generate profits in lower-priced merchandise, while maintaining
an exclusive buying experience for its wealthier clients. Today, a typical
Tiffany store has a dedicated area for high-end jewelry sales that is spacious
and located near the front of the store, with numerous salespeople.
Sterling silver products are located in a separate, smaller area with fewer
salespeople and are also increasingly sold online. Tiffany & Co. is not alone
in developing different business models to serve various client segments –
similar examples can be found in apparel (Ralph Lauren), automobiles
(Ferrari) and hospitality (Starwood).
What these consumer brands have in common is that they have expanded
beyond their core operating models in order to profitably meet the needs of
new customers. In contrast, private banks often attempt to serve Core Millionaires
with the same value proposition and service model designed for
UHNW clients.

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A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
In order to profitability serve the Core Millionaire segment, many banks will
need to craft new value propositions and service models that meet the needs
of these clients and capture their revenue potential. The Core Millionaire offer
should include comprehensive investment and banking products, augmented
by a limited but substantive set of other specialized services, with controlled
access to a relationship manager.
• An integrated private banking experience that feels privileged, but is costeffective.
Clients have diverse service preferences – ranging from those
who prize the exclusivity and personalized service of a private bank to
those who see dedicated bankers and relationship managers as signs of
excessive fees. Private banks should design their value proposition to
focus on partially self-directed clients who want the advice and products
offered by a private bank and are willing to
pay for an offering that can be profitably delivered.
These clients would welcome a tailored
offering that emphasizes:
Full-service brokers who serve
high-net-worth clients often
struggle to broaden their
investment advice beyond
traditional products.
◦ Outcome-oriented, tax-efficient planning
“at your fingertips.” In recent decades,
the emergence of sophisticated family offices
that serve the UHNW segment has
driven private bankers to focus more on customized investments and
specialized services. For Core Millionaires, private banks should revive
their traditional emphasis on tax-efficient, outcome-oriented financial
planning focused on individual and family goals. Full-service brokers
who serve high-net-worth clients often struggle to broaden their investment
advice beyond traditional products. Clients frequently complain
that their financial advisor does not even ask about their other assets.
These clients are looking for a professional “financial quarterback,” and
private bankers are well-positioned to fill this role.
To enable private bankers to efficiently deliver an integrated planning
experience at scale, private banks should focus on developing userfriendly
online platforms that aggregate assets across multiple institutions
and reflect progress against financial plans. The popularity of web
sites such as Mint.com and independent financial planning services
highlights an unmet need for comprehensive financial planning.
Bankers and their teams should be trained to integrate these platforms
into their service models (e.g., incorporating them into client conversa-

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
17
tions, setting alerts that trigger real-time advice) and to layer on valueadded
services (e.g., interfacing with family accountants).
◦ Rewards for consolidating assets. Clients with less than $10 million in
assets tend to concentrate their assets with one provider to ensure
that they qualify as a “premium relationship,” unlike UHNW families,
who often allocate assets across multiple institutions and receive premium
service everywhere. Banks can capitalize on this tendency via
relationship pricing and by creating benefits, such as greater access
to specialists and additional services, at tiered asset levels (e.g., a
loyalty ladder with incremental benefits for every additional $1 million
of assets up to $10 million).
◦ Private bank packaging without customized solutions. The needs of
the Core Millionaire segment can typically be addressed through a
standard model portfolio that is delivered in a manner that reflects
the cachet of the private bank. Too often, private banks deploy their
full set of professional skills to design customized solutions for
clients who do not require this level of advice or service. In the absence
of an alternative approach to financial advice, bankers simply
tend to employ the service model that they offer to UHNW clients.
Private banks need to work with their bankers to build five to seven
standard portfolios of investments aimed at particular outcomes
(e.g., income in retirement), with a flexible overlay that makes the
plan feel custom-tailored.
◦ Access to exclusive proprietary products. Core Millionaires value exclusive
investment opportunities in alternative asset classes and other
non-traditional investments,
but these opportunities do
not necessarily require custom-tailoring.
Private banks
should focus on proprietary
offerings to reinforce privatebanking
exclusivity and
maintain the premium revenue
margins associated
with the Core Millionaire segment.
Creating an attractive portfolio of investment products requires
collaboration with capital markets organizations (“white label” partner-
Private banks should focus on
proprietary offerings to reinforce
private-banking exclusivity
and maintain the premium
revenue margins associated with
the Core Millionaire segment.

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A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
ships for smaller regional institutions) and specialist wholesalers who
focus on proprietary solutions.
• Solutions that address the critical needs of key market segments. Private
banking clients with $1 million to $10 million in assets can be grouped into
major market segments – e.g., retirees, business owners, professionals –
each with a distinctive profile. Since banks cannot create a profitable
model in the $1 million to $10 million space if they try to address all possible
client needs, understanding the common needs of these sub-segments
of Core Millionaires is crucial to developing a compelling offering.
◦ Help Core Millionaires retire “rich.” Retirees in the Core Millionaire segment
require careful financial planning to comfortably maintain their
lifestyle throughout retirement. Unlike UHNW retirees who will remain
wealthy under almost any circumstances, retirement outcomes for
Core Millionaires can vary widely based on the financial decisions they
make today. To support these clients, private banks need to:
u
u
u
Focus their advisory models for Core Millionaires on wealth preservation
and income generation rather than UHNW concerns about
legacy and philanthropy. In particular, concentrate on trade-offs
between spending versus leaving an inheritance and the issue of
retirement risk tolerance (e.g., spending more in early retirement
while active versus conserving assets to avoid income reduction in
late retirement).
Recraft offering from wealth accumulation to income generation by
creating target-date and target-interest products and strategies that
allow retirees to comfortably draw
down their savings based on a wellthought-out
plan.
Play a proactive role in cash management,
including guidance on spending
decisions as retirees transition to new
lifestyles, e.g., retirement lifestyle
benchmarks for various locales or
alerts tied to actual spending versus a
planned budget.
According to McKinsey’s Personal
Financial Assets Survey, business
owners are 25-to-30 percent more
likely to require immediate access
to funds and to feel financially
stressed than professionals or
retirees at the same level of wealth.
◦ Create liquidity and credit solutions for entrepreneurs. Core Millionaire
business owners represent an important source of new assets for

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
19
private banks. Lending and liquidity needs loom especially large for
these clients. According to McKinsey’s Personal Financial Assets
Survey, business owners are 25-to-30 percent more likely to require
immediate access to funds and to feel financially stressed
than professionals or retirees at the same level of wealth. Entrepreneurs’
investment patterns also differ, with many reporting that they
use their businesses to take investment risks. To serve these
clients, banks should focus on making credit decisions based on
an integrated view of personal and business assets and on providing
investment strategies that take into consideration the risks
owners face in their businesses.
◦ Provide tailored solutions for corporate executives and professionals.
Corporate executives and professionals, such as attorneys,
especially tend to
value the investment and
planning expertise provided
by financial advisors. They
are often realistic about
their own financial management
ability and want to
engage with institutions and individuals that can deliver expert advice.
To serve these clients most effectively, banks should designate
certain bankers to focus on specific professions or
companies and develop strategies for diversifying around the
large restricted equity positions that are a central component of
executive compensation (e.g., stock and options for corporate executives,
partnership shares for attorneys).
Determining the right sales
and service model for
Core Millionaires is essential to
capitalizing on the opportunity.
• A profitable operating model. Determining the right sales and service
model for Core Millionaires is essential to capitalizing on the opportunity.
To serve this segment profitably, banks should focus on five elements:
◦ Dedicated bankers for Core Millionaires. To profitably serve this
market, bankers need a different skill set and practice model than
for the UHNW segment. Private banks should concentrate on building
a stable of focused bankers who have the client acquisition
skills required to develop a book of business and are able to serve
a larger number of households by effectively delegating without diminishing
the overall client experience. Creating dedicated pools of

20
A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
bankers will entail changes to organizational structures, performance
management and compensation in order to develop and encourage
the required behaviors.
◦ Intelligent use of specialists. Not all Core Millionaires require frequent
access to specialists in estate planning or trusts. Accordingly, private
banks should be prepared to field a full team of specialists if necessary,
but in limited numbers and with clearly defined missions and areas of
practice. Coverage at many private banks ranges from 100 to 250
clients per specialist, while successful regional banks are able to utilize
specialists at a ratio of 500 to 600 clients per specialist.
◦ Extensive application of technology to client service functions. Private
banks should place a greater premium on back-office operations,
which enable Core Millionaires to provide some of their own client service,
freeing up bankers to recruit and serve more clients. Moreover,
surveys and interviews reveal that not all clients want a high-touch experience
and many are willing to use convenient self-service applications
to complete simple tasks. For example, Fidelity and Schwab hold
Exhibit 8
Banks with bottom quartile revenue margins can double
Core Millionaire investment income through pricing discipline
Average revenue on invested assets
Basis points
Average revenue on deposits and loans
Basis points 1
Top quartile
98
Top quartile
381
2nd quartile
82
2nd quartile
333
3rd quartile
76
3rd quartile
286
Bottom quartile
42
Bottom quartile
248
+133% +54%
1
Total yield on deposits and loans to adjust for FTP anomalies
Source: McKinsey 2011 Global Private Banking Survey

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21
substantial assets from households with more than $5 million in investable
assets and together would rank among the top five private
banks in the U.S.
Banks should provide online capabilities and encourage clients to use
them for transactions whenever feasible. These might include the purchase
or sale of securities, cash transfers or other financial housekeeping.
Technology can also be brought to bear on client-facing
activities, such as individual meetings with specialists via videoconference
or the group delivery of investment perspectives from firm strategists
through webinars.
◦ Enforcement of pricing discipline. As a group, clients with less than
$10 million in assets have substantially less negotiating leverage regarding
fees than wealthier private banking clients. However, individual
private bankers frequently extend standard UHNW discounts and preferred
rates to Core Millionaires. This lack of pricing rigor is evident in
the wide dispersion of realized fee rates across institutions, based on
McKinsey’s observations at individual institutions and the 2010 Global
Private Banking Survey (Exhibit 8). The average revenue margin on investments
for Core Millionaires ranged from 42 basis points to 98
basis points, and total yields on deposits and loans ranged from 248
basis points to 381 basis points. Banks should put in place rigid pricing
guidelines covering the lower end of the market and closely track
and manage exceptions.
These suggestions for creating a service level below traditional private banking
for UHNW clients could be counterproductive, if that initiative has a negative
impact on a bank’s established image and reputation with wealthier
clients. But, as in the Tiffany example, private banks should be able to protect
their traditional franchise and preserve their cachet, while creating a new
offering for Core Millionaires. In fact, given the importance of the individual
advisor-client relationship in wealth management, private banks that protect
the integrity of their traditional business models are unlikely to lose their most
affluent clients.

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
23
Issues for Management
Teams to Consider
Private banks that concentrate primarily on the
UHNW market, as they attempt to revive profitable
growth, will face stiffer headwinds than in the past.
Banks that broaden their traditional focus on UHNW
clients to build a parallel offering to serve Core
Millionaires will gain an important edge. There are
seven major issues that management teams should
consider as they contemplate this move:
• Focus. How well has the bank penetrated the Core Millionaire and
UHNW market segments already How well aligned is its strategic focus
with where growth will be in the future, given its product set, strengths,
brand and service offering
• Business model. What scale (e.g., assets, number of bankers, number
of specialists) is required to manage two distinct business models How
can a private bank capture synergies between the two models, while
ensuring the profitability of each
• Brand dilution and extension. Will bifurcating the business model dilute
UHNW client relationships How can a private bank retain enough
distinction to preserve the cachet of its high-end brand How important
is exclusiveness to UHNW clients versus personal/institutional relationships,
valuable advice and favorable pricing
• Core Millionaire offer. What are the appropriate benefits and incentives
to offer clients in the $1 million to $10 million segment to preserve
the image of a private bank while maintaining high returns and

24 A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
focusing on Core Millionaire issues (wealth preservation, retirement income)
in a customized, yet cost-effective manner
• Micro-market geographic focus. How should the geographic footprint differ
for the UHNW and Core Millionaire offerings How can private banks
take advantage of opportunities outside of traditional money center locations
in areas where the wealth market is smaller and less competitive
• Banker sales and service model. What changes in structure and service
model are required to enable bankers to cover a larger number of less affluent
clients What technology and operations investments are necessary
to give bankers the tools to provide comprehensive service to this
market efficiently
• Compensation. How should bankers and specialists be compensated
when serving the $1 million to $10 million segment Can private banks retain
talent in this segment with a salary plus bonus compensation model
* * *
Ultimately, a Core Millionaire focus may not be right for every bank, and not
every institution will be able to make the transition successfully. However,
those that do will realize a growth multiple relative to their peers and will secure
a lasting advantage in serving this market in the years ahead.
Pooneh Baghai
Daniel Gourvitch
Salim Ramji
Jill Zucker
The authors would like to acknowledge the contributions of Jeremy Borot,
Owen Jones and Nakul Kapoor to this report.

A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
25
About McKinsey & Company
McKinsey & Company is a management consulting firm that helps many of
the world’s leading corporations and organizations address their strategic
challenges, from reorganizing for long-term growth to improving business
performance and maximizing profitability. For more than 80 years, the firm’s
primary objective has been to serve as an organization’s most trusted external
advisor on critical issues facing senior management. With consultants in
more than 40 countries around the globe, McKinsey advises clients on strategic,
operational, organizational and technological issues.
McKinsey’s Wealth Management, Asset Management & Retirement Practice
serves asset managers, wealth management companies and retirement players
globally on issues of strategy, organization, operations and business performance.
Our partners and consultants in the Americas have deep expertise
in all facets of asset management. Our proprietary research spans all institutional
and retail segments, asset classes (e.g., alternatives) and products
(e.g., ETFs, outcome-oriented funds). Our proprietary tools provide deep insights
into the flows, assets and economics of each of the sub-segments of
these markets and into the preferences and behaviors of consumers, investors
and intermediaries.
To learn more about McKinsey & Company’s specialized expertise and capabilities
related to the asset management industry, or for additional information
about this report, please contact:
Pooneh Baghai
Director
(416) 313-3939
pooneh_baghai@mckinsey.com
Salim Ramji
Director
(212) 446-7393
salim_ramji@mckinsey.com
Céline Dufétel
Principal
(212) 446-8081
celine_dufetel@mckinsey.com
Kweilin Ellingrud
Principal
(612) 371-3132
kweilin_ellingrud@mckinsey.com
Onur Erzan
Principal
(212) 446-7172
onur_erzan@mckinsey.com
Jill Zucker
Principal
(212) 446-7989
jill_zucker@mckinsey.com

26 A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market
Further insights
McKinsey’s Wealth Management, Asset Management & Retirement Practice
publishes frequently on issues of interest to industry executives. Among our
recent reports:
Growth in a Time of Uncertainty: The Asset Management Industry in 2015
November 2011
The Second Act Begins for ETFs: A Disruptive Investment Vehicle Vies for Center
Stage in Asset Management
August 2011
Capturing IRA Rollovers: The Net New Money Opportunity for Wealth Managers
July 2011
Winning in the Defined Contribution Market: New Realities Reshape the
Competitive Landscape
September 2010
Restoring Americans’ Retirement Security: A Shared Responsibility
October 2009
Endnote on data sources
This paper incorporates the results of McKinsey & Company’s 2011 Global
Private Banking Survey, which provides comprehensive information on the
global private banking industry. The survey covers all relevant markets: North
America, Latin America, Western Europe, Central and Eastern Europe, the
Middle East and Asia. More than 160 banks participated in the survey,
including eight of the top 15 private banks in the United States.
Survey participants receive customized benchmarking and feedback sessions
and have access to more detailed information than is presented in this report,
while the confidentiality governing the data supplied by individual participants
is preserved.
In addition, this report draws on McKinsey’s proprietary 2011 Global Wealth
Sizing, which includes the firm’s projections for high-net-worth financial
assets in all major markets.
McKinsey would like to thank the firms that participated in the 2011 survey
and sizing efforts for their valuable contributions.

Financial Services Practice
March 2012
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