HNW Clients Demand More Complex Services

January 9, 2024 — Boston

Unprecedented growth and concentration of wealth have opened greater opportunities for asset managers and third-party providers to expand in the HNW and UHNW markets

As investable assets held by high-net-worth (HNW) households in the U.S. have increased by more than $23 trillion since 2011, firms have rapidly grown their service offerings aimed at this demographic. According to The Cerulli Report—U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2023, service offerings, often bolstered by third-party providers, now outweigh personal-relationship-based factors when it comes to driving new client relationships.

Greater than one-third (35%) of HNW individuals state that the reason they began a relationship with their primary advisory provider is related to either services or client experience offered. Additionally, Cerulli data shows that since 2017, every category of service offering has become more commonplace to meet enhanced client expectations and needs.

Notable growth in investment service offerings by HNW practices has occurred in the past six years, with alternative manager search and selection (78%) and internally managed hedge funds or funds of funds (32%) among those growing the quickest. As HNW client demand for alternatives grows, Cerulli recommends that asset management and technology providers explore how their firm’s existing capabilities can be used to enter this fast-growing market—whether through providing greater access to education, improved diligence or analytics capabilities, or simply a fund with differentiated price, performance, or exposure characteristics.

Among planning services, all HNW practices now offer financial planning as a primary or secondary service. Estate planning (70%) and tax planning (45%) have been two of the fastest-growing service areas as advisors prepare their clients for impending wealth transfers and transitions. To address the ongoing need for comprehensive planning offerings, HNW firms are looking to third parties to better leverage technology to improve efficiency and to seek out best-in-class practitioners in the areas of estate, tax, and other complex planning areas to deliver the best outcomes possible for their clients. “Complex planning services will continue to build the bedrock of client success in the wealth management industry. Technology can help firms drive effective client outcomes and strengthen firms’ competitive positioning,” says Chayce Horton, senior analyst.

Cerulli expects that HNW and UHNW client demand for heightened levels of service from their intermediary partners will continue for years to come. “From increasingly nuanced investment management services to more comprehensive and specialized planning services, every arena of high-end private wealth services will experience greater demand,” says Horton. “It is increasingly important for technology providers, asset managers, and other specialist partners and platforms to aid HNW-focused intermediaries in addressing these growing needs for their clients, and the challenges posed in delivering more services while maintaining the highest levels of quality and profitability,” he concludes.

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