Perceptions Differ on Wealth Management

Investors at different income levels define wealth management services differently, research shows, increasing the risk of misunderstanding and client loss for advisers in the channel.

Many financial firms offer wealth management services, according to Spectrem Group’s online research report, “Defining Wealth Management,” with different levels of success. The report shows that a firm’s wealthiest clients are the most familiar with wealth management products and also the most likely to have a favorable opinion of the wealth management services they receive.

Spectrem’s report shows that although 70% of all investors claim to be familiar with the term “wealth management,” 81% of ultra-high-net-worth investors are familiar with the term, compared with just 59% of mass affluent investors. The report defines ultra-high-net-worth (UHNW) investors as those with between $5 million and $25 million in assets, not including equity in a primary residence. Mass affluent investors have between $100,000 and $1 million, not including home equity.

UHNW investors are also more likely to think positively about the term “wealth management.” When asked to give their impression of the term on a sliding scale, with “0” as negative and “100” as positive, the UHNW investors tagged it at 67.22. Millionaire investors (with a net worth between $1 million and $5 million) averaged 64.81, and the mass affluent investors came in at 63.65.

“While the term ‘wealth management’ does remain unclear to some investors, the perception of the term has improved,”‘ says George H. Walper Jr., president of Spectrem Group. “There is a clearer understanding of the services that are expected in wealth management, including a focus on a comprehensive financial plan, investment planning and management, and tax planning.”

Other findings in the report show 65% percent of UHNW investors agree or strongly agree with the idea that wealth management services are appropriate for their circumstances, while only 53% of millionaires agreed with that statement. Just 10% of the UHNW investors disagreed with the statement.

The wealthiest investors also seem to understand the need to pay for wealth management services. When asked to respond to the sentence, “Wealth Management makes me believe I am paying too much for the services,” 28% disagreed. Even fewer millionaires (21%) disagreed.

The wealthiest investors are far more likely than other client segments to receive their wealth management services from a bank (19%) or a brokerage firm (34%). The mass affluent and millionaire investors, the report shows, primarily receive wealth management services from a financial planning firm.

Looking more widely at the wealth management industry, 49% of investors say wealth management services are appropriate for their needs, although there is a significant difference of opinion between investors with a net worth over $1 million and those with a net worth under $1 million.

Forty-five percent of investors obtain wealth management services from a financial planning firm or a brokerage firm, the report shows, while the remainder say they get wealth management services from banks, mutual fund companies or accounting firms.

Researchers also observed a significant gender gap when measuring familiarity with the term “wealth management.” While 77% of male investors are familiar with the term, only 63% of women reported the same.

More on the report and related survey results are available here.