When Private Banks Play Hard to Get: The HNWI vs. UHNWI Dilemma
Michael Mandic
Recruiter for Private Banking & Wealth Management | Founding Partner @ Anderson Wise l Executive Search Consultant | Head-Hunting RMs and C-Level Executives since 2011
In the nuanced world of wealth management, distinctions matter. High Net Worth Individuals (HNWIs) and Ultra High Net Worth Individuals (UHNWIs) may share the "HNWI" acronym, but the financial services they receive can differ significantly.
The Wealth Spectrum
Private Banks and Their Selective Courtship
Private banks have traditionally catered to the affluent, offering bespoke services tailored to individual financial landscapes. However, recent trends indicate a growing preference for UHNWIs, sometimes at the expense of their HNWI counterparts.
In Asia, for instance, clients with less than $1-2 million in investable assets are finding it increasingly challenging to receive customized portfolios. The high costs associated with personalized services have pushed banks to focus predominantly on the ultra-wealthy segment (finews.asia).
Yet here’s the twist: HNWIs, historically, have been a highly profitable group for private banks. Statistical data shows that HNWIs pay higher fees, on average, than UHNWIs, making them a more lucrative segment. The wealthiest individuals often negotiate lower margins due to their substantial portfolios, while HNWIs generally pay standard fees, which results in better profitability per client for the bank (Capgemini World Wealth Report).
The Parody Reflecting Reality
A satirical piece from The Luxembourg Wurst humorously depicts a scenario where a private banker dismisses a client for being "merely" an HNWI. It underscores the industry's exaggerated exclusivity and the shifting focus toward ultra-wealthy clientele. While funny, it’s not far from the truth. https://today.rtl.lu/entertainment/the-luxembourg-wurst/a/2254354.html
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Implications for HNWIs
This selective approach can leave HNWIs feeling sidelined, despite their substantial wealth. The emphasis on UHNWIs may lead to:
Bridging the Gap
To address this disparity, private banks should consider:
Conclusion
While the allure of UHNWIs is undeniable, private banks must not lose sight of the value and profitability of their HNWI clientele. By fostering inclusivity and offering tailored solutions, they can ensure that wealth management remains a personalized and profitable experience for all—regardless of where one falls on the wealth spectrum.
At the end of the day, it’s not just about courting the ultra-rich; it’s about building lasting, profitable relationships across the wealth hierarchy. So, private banks, maybe don’t swipe left on the HNWIs just yet!
Director @ Cornflower Capital | Private Markets Investments
1 个月Private banks are an expensive necessary evil which is getting more and more unnecessary by the day. Right advisor (full- or part-time) or a family office (single or multi), IBKR + 1-2 premium banking accounts (with ZERO fees on everything if you keep $200-250k balance) is all anyone between $1m and $1bn needs. You can pay for your meal and your opera ticket yourself, you don’t need to feed the ancient industry for that.
???????? Expert-Comptable Fiscaliste & Partner @ OLISTONE | Specialised on Wealth Corporate Management & Asset Services ?Trusted Finance Business Partner in Europe ?Lang: ????????????????????
1 个月I would look at it from a different angle: Why UHNWIs Should Stay with Private Banks, and HNWIs Should Consider Family Offices Private banks offer UHNWIs (assets over $30M) exclusive, tailored services, including wealth planning, global investments, and tax optimization. These banks are equipped to handle complex financial needs, making them the go-to choice for managing multi-generational wealth. However, HNWIs (assets between $1M-$30M) might find family offices a more cost-effective solution. Family offices provide personalized wealth management, greater control, and scalability, all while avoiding the high fees often associated with private banks. In short, UHNWIs benefit from private banks' specialized services, while HNWIs should consider family offices for more efficient and tailored wealth management.