Dow Jones

WASHINGTON — Large banks and brokerage firms pride themselves on the menu of services they offer wealthy clients, but investors with $50 million or more are turning up their noses at such packages.

Instead, the richest of the rich tend to see smaller financial operations as better, according to a study to be released later this month by Cerulli Associates, a Boston research and consulting firm that focuses on financial services companies.

Once people reach the $50 million mark they gravitate toward smaller providers, choosing private banks, trust companies, or investment advisers, or forming their own family offices to manage their assets.

A flurry of large institutions, including Citigroup Inc. and Merrill Lynch & Co., have set up trust companies or family office services in the past decade. But the very wealthy are unlikely to use a family office service run by a brokerage or bank, and litigation associated with sloppy trust company operations is expected to increase in the next five years, according to the report.

“They’re shooting for the stars, but they may realize that their target market” is higher than what they can achieve, said Shealyn McGuire, a Cerulli consultant who worked on the report.

The firm surveyed financial services providers and studied data supplied by outside information vendors. It also interviewed 60 senior executives at a variety of asset management industries — from large insurance companies to independent investment advisers.

The results show that traditional depository banks, which in 1992 controlled 79% of the assets of clients with $5 million or more, had only 26% in 2000. Increased competition from brokerage firms, insurance companies, mutual fund companies, and independent investment advisers eroded their market share, Ms. McGuire said.

In addition to brokerages and independent advisers, those likeliest to continue eating away at that share are banks that have developed full-service brokerage capabilities. The insurance and mutual fund industries are less formidable because their sales forces are not used to managing wealthy clients, Cerulli concludes.

While banks with brokerage capabilities or full-service brokerages have the corner on what Cerulli calls the “mass affluent” — those with less than $5 million to invest - nearly every financial services company wants to attract customers with assets above that figure. Such clients offer higher profits, particularly for the brokerage industry.

Among its brokerage peers, Merrill Lynch appears to have the most targeted approach to wealthy clients, Ms. McGuire said. The company has focused its resources on different income segments, so it is not offering services to customers who cannot benefit from them.

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