A Tale of Two Millionaires: - Managers of Wealth

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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 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.
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