By the Scorpiopartnership
Last week’s Ultra, looked at growth opportunities in the wealth space as it related to M&A activity. A different way to skin the same growth cat, and this week’s article, looks at the need to develop clear target client segments to fit your business proposition.
There are some wealth managers, who will choose to focus on a specific part of the wealth curve. We’ve seen that as the cost to serve lower-net-worth clients has grown, wealth managers have sought to focus on delivering services to the UHNW community as a profitable client segment instead.
We know that, some wealth managers are exercising a geographical approach. Whether it is leveraging cultural commonalities (like say Spanish and Portuguese institutions in Latin America or French banks in Francophone countries), pursuing explosive regional wealth creation like in APAC, or betting on Africa’s gradual emergence. This approach tends to treat the world of wealth as though it is the board game of ‘Risk’ – developing strongholds and rooting the firm deep in those locales from which to expand.
Although these approaches have merit, one alternative might be to identify industries where wealth is being created and attempting to cater to HNWs from those sectors.
But if you were to try this approach – where would you go? Well the data suggests it seems to depend on region as much as industry.
Figure 1: Average worth of wealthy individuals, by industry (ordered by global average) – Q2 2015
At a global level the average wealth of the HNWs surveyed ranged between USD5 – USD7 million. However, it’s clear that wealthy individuals can do well across any industry.
In the US, for example, the pharmaceuticals and healthcare industry generates on average the wealthiest Americans, with the travel and tourism sector coming a close second. Given the nature of the red, white and blue’s healthcare system, this is perhaps, unsurprising.
Yet there are some interesting quirks thrown up by this analysis, specifically that clients from the educational sector in the Middle East and Africa are on average wealthier than other HNWs whose assets are derived from other sectors. We’d be delighted to hear from you if you have any thoughts as to why this might be the case so do get in touch with your own theories!
Elsewhere, it should be no surprise that significant South American money can be found in agriculture and agribusiness, while the entertainment, media and publishing sectors are likely to contribute to higher average net worth in Europe.
Closer to home, in the UK, those of you looking to make your money rather than manage others, may wish to keep an eye on any openings in the governmental and public sectors (Figure 2).
Figure 2: Top 5 UK industries by average individual worth
But what does this simple analysis mean for wealth managers and private banks? Wealth managers contemplating a sector specialism need to have practical knowledge about their chosen industries, taking great lengths to understand career progression and where they can add value to those professionals.
One such institution who we know does this to great effect, is Citi Private Bank. Citi PB has focused on providing financial services to the legal profession for half a century! This long-term view, is essential not only to develop expertise and trust, but also to see a client grow from lowly associate to named partner and the financial rewards that brings with it.
There are clear opportunities for wealth managers to attract clients by offering services tailored to the industries their clients work in. One trend we’ve witnessed first-hand, is a number of banks have started to cater to entrepreneurs (product and service mixes vary but tend to include business funding and networking opportunities), but there is a clear opportunity to tailor these services by industry and to differentiate propositions still further.
Whether you’re an individual looking for a new, lucrative career or a private bank searching for wealthy clients, the industry of choice may make a couple million worth of difference, so it may be time to take a closer look at where your wealthy clients are making their money!
Thought for the week: “Worry about being better; bigger will take care of itself. Think one customer at a time and take care of each one the best way you can.” – Gary Comer, Businessman and Founder of Lands’ End.