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.
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. 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.
* First, 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 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 as Goldman Sachs or Morgan Stanley (before the Dean Witter Reynolds 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 $20 million in investment assets, while "Global Wealth Management" focuses on accounts smaller than $10 million.
In the late 1980s private banks and brokerage firms began to offer seminars and client events designed to showcase the expertise and capabilities of the sponsoring firm. Within a few years a new business model emerged - Family Office Exchange in 1990, the Institute for Private Investors in 1991, and CCC Alliance in 1995. These new entities were devoted to educating the ultra wealthy investor and providing a network of peers for the ultrahigh net worth individual and their families. Their growth since the 1990s indicates a market eager to become more informed about private wealth management.
IPI's founder Charlotte Beyer describes the challenge, "The newly liquid entrepreneur has suddenly become the CEO of a new company, My Wealth Inc., a job for which he has had no training. Investors are skeptical of sponsored events because they find it harder to trust that they are getting the full and honest picture of options available to them." Several membership groups often have online communities of investors as well. The first online community was created by IPI in 1998, and today these online groups have proliferated with specialty investor peer groups growing in numbers despite the 2008 bear market.
Wealth Management education for private investors with substantial wealth is offered by several leading universities. The first such program was offered by the Wharton School of the University of Pennsylvania. Since 1999, 520 investors from 29 countries have completed the course. The five-day program is offered twice a year and is a continuing partnership with the Institute for Private Investors. Both The University of Chicago and Stanford University also offer 5 day programs. In 2009, Columbia University offered a three day program on value investing designed for high net investors.
By: MayorTimo / Source: Wikipedia.org
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