First, the field is extremely competitive.  Most banks and other large financial institutions target wealthy investors.

Second, the pool of ultra wealthy households isn't that large, although it is growing.

Third, the ultra wealthy families are extremely fee-sensitive and demanding. That means margins are not as lucrative as standard management pricing tables may suggest.

Indeed, this is why some advisers prefer to focus on clients with emerging, or modest wealth, in the net worth range of $500,000 to $1-million.  

The mere "affluent" (with net worths of $1-million to $5-million) may only need investment management.

Yet the ultra-wealth may also need full family and business wealth advisory services, said Tim Cestnick, founder of WaterStreet Family Wealth Counsel.

Cestnick sets the threshold for affluent wealth families as $5-million to $20-million in net worth and for ultra wealth households at $20-million-plus. WaterStreet serves 17 such families currently.

Cestnick classifies households with $1-million to $5-million as "mass millionaires." There are 335,000 such households in Canada. There are 60,000 "penta millionaires" (with net worths of $5-million to $10-million) and 20,000 decamillionaire households with more than $10-million.

Despite comprising only a fraction of Canada's households, the wealthiest families control almost half the investable assets: $1.3-trillion of $2.4-trillion.

The "vast majority" of that $1.3-trillion held by wealthy families is controlled by the decamillionaires. They are the ones with "family offices."

Not surprisingly, "the world changes above $20-million in net worth," Cestnick told the conference, "Demand for transparency is much greater — in fees and everything you do."

Clients at that level also expect "true objectivity."

"Below $20-million, clients should not expect true objectivity," Cestnick said, hastily adding "that doesn't mean they're getting bad advice."

Such clients have less tolerance for proprietary or "in house" financial products and prefer "open architecture" solutions. The complexity of the planning rises, as does the time commitment required by the adviser.

Cestnick estimated the millionaire households by age demographics. There are 82,000 Canadian millionaire households in the 45 to 54 year age bracket, or about 20%; 85,000, or 21%, are aged 55 to 64; 59,000, or 15%, are aged 65 to 74; and 107,000, or 26%, are aged 75 or over.

Therefore, the Baby Boomer generation presents a "great opportunity" for aspiring wealth advisers.

The top 20 of the 200 firms control "the vast majority of assets": $94.5-billion. Not surprisingly, four of the top five are the big banks. Other firms in the top 20 include investment counsel firms such as Jarislowsky Fraser Ltd., Burgundy Asset Management or Gluskin Sheff & Associates, and firms with a base in mutual funds, such as Phillips Hager & North, and AGF Management Ltd.

John Doig, senior vice-president of marketing for Scotiabank, described how various divisions of the bank — estate and trust services, private banking, brokerage, investment counseling, mutual funds — are all vying for the same affluent customers. The marketing challenge was to segment its customers while preserving the bank's overall brand.

Scotiabank is well known for television commercials that declare "you're richer than you think."

Scotiabank's main brand uses the color red in its marketing materials but a brochure for Scotia Private Client Group was able to omit that color, Doag said. They "drew a line in the sand" for clients above $1-million in assets.

That group was targeted through a "customer appreciation" program called "Scotia Private Client Group Great Nights."

Taking a leaf from a similar program at Northern Trust, Scotiabank's first Great Night was three years ago with singer Michael Buble. It became such a success that today clients ask the bank when the next Great Night is scheduled. As a result, assets in the private client group doubled to more than $35-billion.

Reference: Truly affluent require wider type of service, by Jonathan Chevreau, Financial Post, May 14, 2007