Career in Private Wealth

What is private wealth management?

Private wealth management is an investment advisory practice that incorporates financial planning, portfolio management, and other aggregated financial services for individuals, as opposed to corporations, trusts, funds, or other institutional investors. From the client’s perspective, private wealth management is the practice of solving or enhancing their financial situation and achieving short-, medium-, and long-term financial goals with the help of a financial adviser.

From the financial adviser’s perspective, private wealth management is the practice of delivering a full range of financial products and services to clients, so that those clients can achieve specific financial goals.

What does a private banker do?

Private bankers meet with clients to define investment goals and then work with financial analysts and other professionals in the firm to create individualized investment strategies to meet those goals.

After defining a strategy, private bankers execute the strategies by selecting appropriate mixes of securities and investment products for the client portfolios, which they then manage and adjust on a continual basis.
In addition to investment advising and portfolio management services, many private bankers oversee deposit and cash management services, credit and lending services, tax planning services, trust services, retirement products, and annuities and insurance products.

Many private banking divisions in large banks handle virtually all aspects of clients’ finances. A private banker often works with relatively few clients to provide the focus and personalized service that private banking clients often demand. In some firms, private bankers focus on managing client portfolios while relationship managers handle other client needs.

How private wealth management firms operate

Most private wealth management groups operate as small segments within large financial institutions and are designed to offer specialized wealth management to individuals. They sell proprietary and non-proprietary investment products and services to high net worth individuals to help grow their assets and provide for future generations. The private wealth management segment usually comprised of a variety of specialists who can offer advice on diverse types of investments such as hedge funds, money markets, private equity, and other types of investments. Independent wealth managers leverage their expertise in risk management, tax, and estate planning to manage the wealth of their HNWI clients.

A high percentage of private wealth managers charge their clients a proportion of the assets under management. A fee-based payment scale, as opposed to a commission-based payment scale, offers less conflict of interest and better performance potential. A commission-based payment may motivate the private managers to recommend investment products and services that will earn them high commissions but that offer less potential to grow the client’s wealth. However, a fee-based payment allows the wealth managers to choose a combination of portfolios with high profitability that will grow the client’s wealth.

High net worth individuals may also consider opening a family office to provide a more personalized approach to their investments. Family offices may be either single family offices or a multi-family office. A single family office provides support to one wealthy family, while a multi-family office can serve multiple HNW individuals and families. Multi-family offices are more common than single-family office because it allows for cost sharing of investments and consulting expenses.

Job description

You would initially start in something like an assistant RM (Relationship Manager) role. This means that you will not immediately start with advising clients but would rather assist the actual RM with his tasks to service his clients.

As an Assistant RM

Some activities you can expect to do as an assistant RM:

  • Assisting with compliance and regulatory approvals. This involves collecting and vetting client KYC documents like ID proof, net worth statements and whatever else is required as per local law.
  • Preparing presentations or other materials for the RM.
  • Attending conference calls where the RM would most likely take the lead.
  • Assisting the WM team with analysis, risk management, monitoring, compliance and other support tasks.

To sum it up, the assistant RM has essentially two main responsibilities – assist the RM with whatever he needs to service his clients and learning as much as possible to eventually start handling his own clients.

As a Wealth Manager

Once you are a full-fledged RM, you would have a client base of your own to manage. The role of a wealth management RM is quite different form that of a corporate/ investment banking RM. Although all RMs are eventually just servicing clients, the products they are selling and their clients needs are totally different. Anyway, getting back on topic, here is what would be expected of you as a wealth management RM:

  • Advising existing clients on how to maximize their wealth by recommending relevant products and services. The first step is always the creation of a financial plan for the client based on her goals and targets and a detailed analysis of her current portfolio. This means a lot of meetings or calls with the client or her staff and a bit of number crunching.
  • Business development efforts – trying to gain wallet share from existing clients or on-boarding new clients.
  • Internal meetings with investment professionals or product specialists to understand new products and advising them on what new products they should focus on.
  • Ensuring full compliance with internal and governmental regulations and laws. The RM is the one ultimately responsible for his clients even if someone else (like the assistant RM or a back-end team) has helped him with the on-boarding.
  • Meeting revenue, asset build-up, cross sales and other targets for the bank.
  • Continuous monitoring of risks to ensure optimal performance for both the bank and the client.

As a Portfolio Manager

While the RM’s do the front-end client facing work, someone has to actually manage the assets and risk. That is where the Portfolio Managers come in.

  • Implement the client’s investment strategy and construct the portfolio based on internal research.
  • Review and adjust the portfolio based on the market situation and client needs as communicated by the front-end team
  • Implement long-term strategic shifts or short-term tactical shifts in the portfolio as and when necessary.
  • Be fully aware of all relevant products offered by the Private banking division and use them optimally.
  • Maintain an active understanding of all asset classes used in portfolio construction like mutual funds, ETFs, hedge funds, equities, structured products and so on.
  • Perform Risk Management at the portfolio level.
  • Coordinate with Relationship teams to help them service their clients better and increase wallet share.

Important skills for Wealth Managers

  • Tenacity – Being proactive is essential for success in wealth management. The career requires a strong desire to build a rapport with clients and go the extra mile to ensure they are receiving the best possible service. The industry is competitive, there are many other wealth managers out there who want your clients. Drive and stamina to work long hours will be important for success.
  • Communication – While knowing how to crunch numbers is important for any financial professional, being able to communicate what the numbers mean for clients is vital to your success as a wealth manager. Whether in a face-to-face client meeting or corresponding via email, you must be able to explain complicated financial concepts in ways that make sense to your clients. A failure to communicate effectively could result in higher turnover for you, because your clients will not have a good understanding of the value you bring to them.
  • Anticipation – Being able to think long-term and envision what your clients will need from you in the immediate or distant future will help you be more successful. Clients will not always know what they need or what they should ask. Being able to anticipate situations and needs, and take care of them ahead of time, will not only build trust, but it will help you build a solid rapport with clients as well.
  • Ethics – The scandals that have plagued the financial industry make ethics an increasingly important skill for success. Not only are advanced designations, such as CFA® and CFP® certification, making ethics a bigger priority than ever before. All clients, particularly high-net worth clients, want wealth managers who show integrity, confidentiality, and professionalism. Adhering to the utmost ethical standards is the best long-term retention strategy.

Key players globally

  1. Bank of America – The Bank of America Corp.’s Global Wealth & Investment Management division is ranked number one on the list with $1.35 trillion in AUM. One reason that Bank of America is ranked so high is that it acquired Merrill Lynch in the aftermath of the 2008 financial crisis.
    The Global Wealth & Investment Management division focuses on two types of clients: people with over $250,000 in total investable assets and high-net-worth individuals for whom Bank of America can provide comprehensive wealth management solutions.
    It has more than 20,000 wealth managers in 750 branches. In 2018, Bank of America’s Global Wealth & Investment Management division had a net income of $4.1 billion, up 33% from the previous year.
    Bank of America’s Global Wealth & Investment Management absorbed Merrill Lynch during the 2008-2009 financial crisis.
  2. Morgan Stanley – Morgan Stanley Wealth Management ranks second on the list with $1.26 trillion in AUM. It has more than 15,600 wealth managers in nearly 600 branches.
    In 2018, net revenues rose 6% from 2017 to $40.1 billion. Both its asset management and net interest income revenues increased, which helps explain the firm’s growth. Its net income was $8.9 billion in 2018, an increase of 44% from the prior year.
  3. J.P. Morgan – J.P. Morgan Private Bank, now part of JPMorgan Chase & Co., is the third-largest wealth management firm with $774 billion in AUM. Its wealth management division has 1,300 wealth managers in only 48 branch offices. In 2018, assets for J.P. Morgan Private Bank was 28% of its total AUM.
  4. Wells Fargo – Falling right behind UBS is Wells Fargo & Company with $604 billion in AUM. The firm has almost 15,000 wealth managers in 1,468 branches.
    In 2018, its total revenue was $86.4 billion, a roughly 2% fall from the previous year. However, net income rose 1% to $22.4 billion for the same period.
  5. UBS – UBS Wealth Management is in fifth place on the Wall Street Journal’s Top 40 wealth management firms with $601 billion in AUM. It has 7,100 wealth managers in 208 U.S. branch offices.
  6. Charles Schwab – With $421 billion in AUM, Charles Schwab places sixth on the list. The company employs 2,000 wealth managers and has 345 U.S. branch offices.
    In Charles Schwab’s current structure, wealth management falls under the umbrella of Investor Services. In 2018, net revenue for investor services increased by 18% from the prior year. This growth is in large part due to increases in asset management and administration fees.
  7. Vanguard Group – In sixth place is The Vanguard Group with $406 billion in AUM. Vanguard differs from its competition on this list as it is client-owned rather than publicly traded or privately owned. As a result, Vanguard is able to focus more on clients while offering them a plethora of investment opportunities such as low-cost mutual funds, ETFs, advice, and other related services.
  8. Fidelity – Fidelity Investments ranks eight on this list, with $400 billion in AUM. It has about 2,400 wealth managers in almost 200 offices.
    Fidelity has two types of wealth services: Wealth Management, which requires a minimum investment of $250,000, and Private Wealth Management, which requires a minimum investment of $2 million.
  9. Goldman Sachs – The Goldman Sachs Group, Inc. is the eighth-largest wealth management fund with $300 billion in AUM. It has 500 wealth managers operating in 13 branches.
    Like Charles Schwab, Goldman Sachs reports its wealth advisory services under an overarching segment: Investment Management. In 2018, Goldman Sachs reported net revenues of $7 billion for this segment, which is an increase of 11% from the previous year.
  10. Northern Trust – Rounding out the top ten is Northern Trust with $260 billion in AUM. It has 680 wealth managers in 62 branches.
    The firm caters to ultra-high net worth individuals. In 2018, Northern Trust’s revenue hit $5.96 billion, an increase of 11% over the past year.

Analyst questions

  1. What is the most important trait for a private banker to possess?
  2. Since you have more than 20 years of experience in the PWM industry, how has your journey been? What are the most valuable lessons you have learnt over time?
  3. How do you deal with the various behavioral biases of a client? I am sure this phase of coronavirus must have been challenging in that aspect.
  4. How open minded do you think HNIs are toward the alternative investment segment?
  5. Wealth management is all about the client, what factors do you consider to be important in building a successful long term client relationship?
  6. How has the industry of PWM evolved in the past decade and what changes do you expect in the future?
  7. How does a day in the life of a private banker look like?
  8. Private banking is considered as one of the most satisfying and enriching career in finance. Would you agree?
  9. What would your advice be to me as a fresher to kick start my career in PWM?



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