Changing investor demographics and preferences are reshaping the approaches of advisory firms to serving an increasing number of wealthy clients, which necessitates wealth managers adapting their investment strategies and client services to better meet their demands, according to a Cerulli report, released Tuesday.
Moving Upmarket
Wealth creation and concentration among wealthy households has grown in recent years, causing industry players to move upmarket to capture high net worth (HNW) clients, Cerulli said.
Cerulli forecasts the total advisor-managed HNW industry will exceed $30 trillion in assets under management (AUM) by 2028, driven by an expected annual growth rate of approximately 9.3%. By the firm’s definition, HNW households have at least $5 million in investable assets.
“Across the wealth management industry, the climate is ripe for practices looking to move upmarket, and firms are making this move by investing in and expanding their service offerings,” Andrew Larsen, Wealth Management Analyst at Cerulli, said in a press release announcing the release of the third quarter Cerulli Edge—U.S. Advisor Edition.
“HNW investor-focused practices, sensing the growing value of both attracting new wealthy clients and retaining current premier clients, have been adding more comprehensive services at a rapid pace over the past several years to accommodate their clients’ nuanced needs,” he said.
“Wealthy investors have more complex service demands than the average client, and these needs are a deciding factor in their choice of advisor.” — Andrew Larsen, Wealth Management Analyst, Cerulli
“Wealthy investors have more complex service demands than the average client, and these needs are a deciding factor in their choice of advisor,” he continued, urging advisors to “deliver a ‘white glove experience’ and superior levels of service across every aspect of the client service spectrum.”
Larsen predicted, “Practices that can meet these service needs with a strategy for reliably scaling them will have more success attracting HNW clients—and gaining their trust.”
Increasing Services
An average of 12 services were offered in 2024 by wealth managers focused on serving HNW investors, according to the report. That was up from 10 in 2017, Cerulli pointed out. The most common services offered by wealth advisors are asset allocation (95%), basic financial planning (89%) and cash management (84%), according to the report.
However, a “select cohort of services has seen particularly wide adoption compared to others in recent years,” Cerulli noted.
In 2017, 42% of HNW firms provided trust administration and trustee services and 34% provided private banking services, according to Cerulli. But, last year, their use soared to 61% and 59%, respectively, Cerulli said.
Meanwhile, 56% of HNW practices offered estate planning services in-house in 2017, compared to 73% in 2024, according to Cerulli.
Also growing in adoption from 2017 to 2024 were tax planning, preparation and compliance services, increasing from 29% of HNW practices in 2017 to 38% in 2024, the report says.
The report also found that 81% of advisors polled agreed that incorporating alternatives helped them differentiate their practices, move upmarket and grow AUM.
“Given how relationship-based the financial advice industry has always been, it’s surprising to see that the breadth of service offerings has, in many cases, become a more important factor than previous advisor relationships for HNW clients looking for a wealth manager,” Larsen told WSR.
He added, “From an investor’s perspective, in an environment where everyone has been adding more complex services, wealth managers who are not expanding their service offerings could appear less competitive.”
Data in the report was gathered as part of Cerulli’s Advisor Research Collaborative, an “annual process of surveying financial advisors” that is collected continuously through the year, as well as the Cerulli Private Wealth Management Executive Survey 2024, which it said provides “C-suite-level perspectives” from over 75 HNW-focused wealth management firms that collectively account for over $3.1 trillion in AUM.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
