There are 771,120 and 62, 410 high net worth and ultra high net worth households in the US respectively, new figures from Cerulli Associates show.

There are 771,120 and 62,410 high net worth and ultra high
net worth households in the US respectively, according to a new report by Cerulli
Associates, which looks at a number of related trends. 

The Boston, MA-based research firm analysed data supplied
by the Federal Reserve and US Consensus Bureau in collating these estimates.

Combined, the firm said, the US HNW marketplace is represented by
833,530 total households, which own some $9 trillion in investable assets. This,
it added, means that 0.7 per cent of all US households own 31 per cent of the
country’s investable assets.

Cerulli believes that the average age (62 years) of these investors reinforces the
notion that multi-generational wealth preservation and transfer strategies – as
well as “soft services” like family meeting facilitation - are common traits
among the most successful industry channels and individual advice providers.

“The scale and scope of services offered by the time-honoured
HNW providers, mainly wirehouses and private client groups (e.g., Goldman
Sachs), continue to dominate overall HNW assets; however, registered investment
advisors (RIAs), MFOs, and, interestingly enough, state-registered bank trust
companies are gaining substantial traction,” the firm said in its latest report, High Net Worth and Ultra High Net Worth
Markets 2013: Understanding the Contradictory Demands of Multi-generational
Wealth Management.

“For many legacy providers, including wirehouses and bank
trusts, this should be considered a critical step to improve the likelihood
that heirs do not follow in the footsteps of their wealth-creating peers, who
are progressively shifting their assets to providers that offer greater levels
of flexibility and control, including direct providers (e.g., Fidelity and
Charles Schwab),” it said.

Relationship consolidation 

According to Cerulli's data, HNW investors increased the number of provider
relationships they have in 2013 to an average of 4.4.

“It may seem logical to assume these actions are a direct
result of capital market performance since this trend accelerated during and
immediately after the recession. However, HNW investors have the most
optimistic economic outlook among all wealth tiers, yet the number of providers
continues to expand,” the firm said.

Rather, it cited “blemished brands and reputations”
that many financial institutions have endured. “And, as we will examine many times over, investors and
advisors contemplating relocating channels are increasingly pursuing boutique-like
service models (e.g., RIAs, MFOs, state-registered trust companies).”

Fee compression

According to figures in the report, almost 75 per cent of HNW providers have
stayed committed to their “stated fee schedules” over the past three years,
while the other quarter reported an increase.

The most common motives for increasing fees involved
offsetting escalating compliance costs and the expenditures required to upgrade
infrastructures. Cerulli emphasised the “stated fee schedule” as there remain
major differences between HNW providers’ stated fees and the fees that are
actually being imposed, it said.

“Given the intensifying competition for HNW assets, it
should come as no surprise that a client’s investable assets continue to be the
pivotal element in determining fees,” it added.

A lucrative business line

Over half of all asset managers believe that the HNW
marketplace is more appealing than other business lines due to the sophistication
of investors (56 per cent), the various vehicles used (53 per cent), and long
holding periods (50 per cent). Less attractive industry characteristics include HNW
providers’ required revenue sharing, pricing flexibility and time-consuming
sales processes.

“Asset managers can gain significant insights when viewing
these attributes by the individual distribution channels that are advising the
clients,” Cerulli said.