Private Wealth Management

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Traditionally, the wealthiest retail clients of investment firms demanded a greater level of service, product offering and sales personnel than were received by the average clients. With an increase in the number of affluent investors in recent years, there has been an increasing demand for sophisticated financial solutions and expertise throughout the world.

Private Wealth Management (PWM) is the term generally used to describe highly customized and sophisticated investment management and financial planning services delivered to high net worth investors. Generally, this includes advice on the use of trusts and other estate planning vehicles, business succession or stock option planning, and the use of hedging derivatives for large blocks of stock.

The CFA Institute curriculum on "Private Wealth Management" indicates that there are two primary factors that distinguish the issues facing individual investors from those of institutions. Firstly, time horizons are different. Individuals face a finite life as compared to the potentially infinite life of institutions. This fact requires strategies for transferring assets at the end of an individual’s life. These transfers are subject to laws and regulations that vary from locality to locality and therefore the strategies available to address this situation vary. A second factor contributing to different portfolio management strategies for individuals and institutions is the fact that individuals are more likely to face a variety of taxes on investment returns that vary from locality to locality. Portfolio management techniques that provide individuals with after tax returns that meet their objectives are necessarily going to be specific to these tax structures.

The term was first used by the elite retail (or "Private Client") divisions of firms such Goldman Sachs or Morgan Stanley (before the Dean Witter merger), to distinguish themselves from mass market offerings, but since has spread throughout the financial services industry. Certain larger firms(UBS, Morgan Stanley and Merrill Lynch) have "tiered" their platforms - with separate branch systems and advisor training programs, distinguishing Private Wealth Management from "Wealth Management", with the latter term used to describe the same type of services, but with a lower degree of customization and delivered to mass affluent clients. At Morgan Stanley, "Private Wealth Management" is the retail division focused on serving clients with greater than $10 million in investment assets, while "Global Wealth Management" focuses on accounts smaller than $10 mil.

[edit] Firms

Most major investment banks, consumer banks and brokerages offer some degree of private wealth management services. But, some firms focus on exclusively serving the needs of the wealthy.

Some of the major investment firms engaged primarily in PWM services are: