Merrill Lynch & Co. will increasingly look abroad to build its roster of high-net-worth clients, a executive said.
This week the New York company reported a jump in overall international business, which accounts for 35% of its net revenue, up from 25% four years ago. The company does not break out revenue for the private client sector, a spokesman said.
Merrill also outlined its plan to tap into what it estimates to be some seven million high-net-worth individuals defined as having more than $1 million in investable assets. Nearly two in three of those potential customers live outside the United States
That sector is growing, according to a recently published study Merrill conducted in conjunction with Cap Gemini Consulting. In 1999, the number of high-net-worth investors grew by 18%, thanks largely to global stock market growth of 37%. Their assets also ballooned, by 18%, to $25.5 trillion.
Though the choppy markets in recent months may have tempered some of those numbers, there is still room for growth, both in the number of wealthy individuals and in their assets in the coming years, said Peter Ham, a director of private wealth services in Merrills international private client group.
In fact, Merrill executives expect those assets to expand some 12% a year until 2004.
There has been a strong creation of wealth over the last five years, Mr. Ham said. And with 64% of high-net-worth individuals living outside the United States, Merrill has sought to reach across borders and overseas, with acquisitions in Canada, Australia, and Japan, Mr. Ham said. Europe also presents a big opportunity, but Merrill will probably try to grow there by internal expansion rather than acquisition, Mr. Ham said.
The fast growth outside the United States stems from several developments, such as strong capital markets in some regions and market deregulation in others, Mr. Ham said. For example, Japan now presents a good opportunity thanks to the extensive deregulation of its markets in recent years, he said.
Meanwhile, Merrills study also determined increasing growth in a more select category the ultra-high-net-worth individual group, where Mr. Ham works.
To qualify for entry, clients have to have $30 million in personal financial assets, $10 million of that invested with Merrill. There are only 55,000 such individuals in the world, according to the study.
But given the increase in sales of family businesses, and until recently, the spate of public offerings for technology firms, more people are qualifying for membership. For example, in 1993, just 4% of individual wealth was attributed to the software and Internet industry, Mr. Ham said. Last year, wealth generated by that industry sector had risen to 22%, Mr. Ham said.
According to Mr. Ham, The competitive edge in private banking is to provide services that help the investor monitor that wealth across different firms. Merrill has offered the so-called open architecture approach for the last three or four years, he said.
Mr. Ham described as fierce competitors both Goldman Sachs & Co. and Morgan Stanley Dean Witter & Co. Outside the United States, Mr. Ham said he bumps up against local banks.