Citi Private Bank is an example of a firm that has its eyes set firmly on targeting individuals with a liquid net worth of at least $25 million. The firm has moved away from being a distribution business with some 17,000 brokers, to one with around 175 bankers focused on larger – but fewer – UHNW clients and family offices. Meanwhile, Convergent Wealth Advisors has broadened its horizon and is looking to attract potential clients earlier in the wealth creation cycle, while retaining its UHNW focus. Convergent rolled out Independence a few years back to serve the “millionaire next door.”

But for New York City-headquartered Sontag Advisory, there is no client “sweet spot,” so to speak. The firm is somewhat unusual in that it “bookends” the entire wealth spectrum, with some very large, and some smaller, clients.

As the firm's client roster grew after opening its doors in 1995, its founder, Howard Sontag, realized that “we had to add the ability to manage assets for multiple generations down from those primary ultra high net worth clients,” Michael Delgass, managing director, told Family Wealth Report.

It became increasingly apparent that being able to serve the mass affluent market was essential to retain clients over generations – that, while the grandchildren of these wealthy clients may not have heaps of money right now, they are well-positioned in this respect for the future, Delgass explained.

This is particularly relevant today given the $41 trillion that is expected to be transferred from one generation to the next between 1998 and 2052 – the largest transfer of wealth in US history.

“We didn't want to say, 'come back when you've inherited something,'” Delgass said. A client may have, for example, $100,000 in a custodial account and a trust that has yet to distribute.

Trends

One notable trend Delgass has observed from working with clients across the wealth spectrum is that people have woken up to the benefits of liquidity and transparency.

“Fewer people want the latest, greatest 'cocktail conversation' investment that they don't quite understand,” he said. “At the higher net worth end, people have recognized how gates in private equity and hedge funds can limit their ability to respond to changing conditions. There is real demand for transparency and liquidity.”

Indeed, hedge fund managers refusing to provide transparency emerged as the top reason for an investor veto in a survey by Deutsche Bank earlier this year. Meanwhile, Franklin Square Capital Partners previously found that a high level of integrity and transparency is the most important consideration for investors when selecting an alternative investment provider.

Technology

On the technology front, a number of firms in the sector – at the mass affluent level ultra high net worth end – have recognized the benefit that having an online offering of automated wealth management services can bring. But Delgass has noted that while “robo advising” is a significant trend among those with a lower net worth, what many of the firm's wealthier clients are really looking for is robo reporting.

“They're looking for consolidation, family office reporting that is dynamic and responds to changes but also helps with administration,” he said. “I think robo reporting consolidation is going to be an important tool if people can capture it for that purpose also.”

On that note, the way that technology developments and upgrades are executed generally is another area Sontag Advisory pays close attention to, as clients with varying levels of wealth will likely have different needs and desires.

“If you bring in new solutions but don't train clients how to use them...it has no value,” Delgass said.

For example, as wealthier clients may require or ask for more sophisticated technology solutions, the firm must ensure that those who are “not as far along” know how to use everything.

Indeed, at the Family Wealth Report Summit in March, a member of the audience said one of the biggest complaints with new technology at her firm was that the end-user was never asked for their input .

“In a way, that's one of our biggest challenges, because internally we can push technology forward ourselves – we can have our ear to the ground, go to conferences, listen to what other people are saying and try to figure out what the next greatest thing is going to be,” Delgass said. “But then it's a long, slow slog of trying to get the 95 per cent of the clients that are not quite right on top of it to see why it may help and be of interest to them.”

Meanwhile, concerns around data protection and information security have intensified in the sector, at both the individual and enterprise level. At Sontag, clients are growing increasingly aware of the risk that having piles of paper carrying extremely sensitive details entails.

“We're piloting a paperless meeting because the feedback we received from some people was that 'all this paper is insecure,'” Delgass said.

It is also worth mentioning that concerns such as these are certainly not confined to the high net worth sector; there has been a global movement in recent time of consumer banking clients opting out of paper statements, for example, and instead logging in to their accounts online to review their finances and make payments/transfers.

Delgass said Sontag is working on training clients on how to use an iPad to access secure websites/portals that would enable the two parties to share information ahead of a meeting and then go through it together more comprehensively – and securely.

Talent

Finding and retaining talent has emerged in a number of industry surveys as a significant area of concern for players of all stripes.

“Research seems to suggest that there aren't a lot of people entering the field that are of the right age and have the right training,” Delgass said.

Echoing this, according to estimates last year from the Boston, MA-based research firm Cerulli Associates, 43 per cent of financial advisors are either at or approaching retirement and 43 per cent are over the age of 55. While this is not necessarily a problem by itself, many have voiced concerns over the fact that the US doesn’t have an equivalent number of younger, experienced advisors to succeed the growing cohort of those edging closer to retirement.

“Locating those people and attracting them...I think is a really big challenge for the us and the industry at large,” Delgass said.

Referring back to the US wealth transfer, he noted that many of the beneficiaries of wealth are not going to be in the 50-60 year-old advisor generation.

“They are younger than that and they need to have a peer group they can talk to,” he said.
But while there may be challenges with finding the right people, Delgass noted that Sontag is open to recruiting individuals with broader skill sets and “making lemonade with the lemons,” so to speak, and training from the grass roots up.

“The advantage I think we and the larger RIAs have is that, when you have a centralized chief investment officer office, you can bring in people that may, for example, know a ton about estate planning and taxes but not about necessarily about investing – but that doesn't matter because the investment services are being delivered in a centralized way.”