From access to sophisticated investments to portfolio complexity, many HNW individuals have their wealth professionally managed. Facing increased competition and greater demand for customization, wealth managers are looking towards niche audiences.
And it’s easy to see why: focusing on a specific client group allows wealth managers to carve out a space within the market and address their needs in detail rather than offering a one-size-fits-all approach.
It’s also easier to become well-known within the niche market. Morgan Stanley is known for targeting celebrities and athletes through its Global Sports & Entertainment division. Its services are centered around the distinct needs of actors, directors, and professional athletes. With a team of financial advisors who specialize in understanding the financial needs and goals of this segment, Morgan Stanley can help these individuals with choices about saving, spending, investing, and giving initiatives.
Tapping into lifestyle traits and social behavior can also provide an opportunity for resonating with niche HNW segments. In December 2015 it was reported that Credit Suisse filed a trademark for an investment club that targets the ultra-high net worth population in the US by providing a social network and financial products. Originally titled Eleven (a reference to Credit Suisse’s New York headquarters at 11 Madison Avenue), the platform is meant to offer services related to financial investing, venture capital, private equity, real estate, yachts, and other luxury products. In June 2016 it was reported that the name of the project changed to Clade and Credit Suisse now holds a minority stake in the company. The move comes as banks seek new ways to attract and retain clients, especially self-made HNW individuals and those who come into inheritance.
When it comes to identifying niche markets, wealth managers may come to find that segments already exist within their client base. In April 2015 Fidelity Institutional, the division of Fidelity Investments that provides investment management products to registered investment advisors (RIAs), announced a partnership with FirstPoint Financial to provide RIA clients with access to client segmentation services. Not only does this help advisors analyze their existing and future client base, but it also aids them in developing strategies to segment their clients.
Our 2015 Global Wealth Managers Survey shows that 77.5% of wealth managers anticipate demand for financial planning services to increase over the next two years. To resonate with clients on a more detailed level, wealth managers should consider identifying niche segments within their client base. Providing something special to a niche segment has the potential to strengthen relationships as well as capture a larger slice of market share. At the same time, managers should be wary of spreading the company’s offering too thin: “everybody” is not a target audience for reasons of lack of understanding and expertise. As the wealth management industry becomes more competitive, wealth managers should determine if a more detailed, customized offering for niche HNW segments is feasible.
By Nicole Douglas, Wealth Management Analyst