An executive at U.S. Trust Corp. said that banks, private banks, and trust companies are positioned to gather market share as the wealthiest Americans move toward retirement and consolidate their assets with one adviser, but analysts are less confident this will happen.
Paul K. Napoli, an executive vice president and head of the personal wealth management unit at the New York trust company that is owned by Charles Schwab Corp., said the wealthiest 1% of Americans want to consolidate their assets with one consultant who has a lot of technical expertise on investments, tax and estate planning, and retirement consulting.
"Banks, private banks, and trust company are the best place to look for advice because of the years of experience that these advisers have with wealth transfer," he said. "The experience we have is a strong selling point and helping us generate a lot of new assets."
Geoffrey Bobroff, an analyst at Bobroff Consulting in East Greenwich, R.I., said, however, that it would not be that easy for banks. "I think we have more institutions chasing these accounts than there are accounts to chase," he said.
A second analyst said there will be enough new assets to go around to the increasingly similar advice-givers that have proliferated.
Rus Prince, the president of Prince & Associates in Shelton, Conn., said every distribution channel will gain assets because, in the next 10 years, there will be a lot more assets seeking management. Wealthy investors will continue using multiple advisers, though, he said.
"Everyone has an opportunity to excel," he said. "We have to stop thinking in terms of institutional categories because everyone can offer everything. The differentiation between types of firms is becoming more negligible than ever before."
Banks' experience alone would not draw in the wealthiest individuals, Mr. Bobroff said. Historically, banks have tended to be too conservative for ultra-wealthy investors. "Their conservative stand may hurt them in a market where you need to be active in the alternative categories in order to really draw investors," he said. "They need expertise and experience in more than just wealth transfer."
Mr. Napoli agreed that banks, trust companies, and fiduciaries in general need to offer a wider array of asset classes. "We at U.S. Trust have done it, and we continue to do it," he said. "The world is more than just stocks, bonds, and your classic investment choices. Firms have to be creative in terms of building a portfolio."
A U.S. Trust annual survey of affluent Americans released Tuesday says that fewer than 20% of investors in this category hold alternative investments such as private equity, hedge funds, or venture capital and that these assets were less than 5% of the typical affluent investor's portfolio.
In fact, it may be these investors, and not especially their bankers, who lean to conservative views.
Mr. Napoli said most affluent investors worry that alternative investments are too risky, lack transparency, and require minimums that are too high. U.S. Trust has given its clients research on alternative investments for a couple of decades, he said, and as they learn more, their interest in these products rises.
Overall, the wealthiest Americans were more confident about the stock market in this year's survey than in last year's, he said. An index that gauges investor expectations for the market jumped to 63, compared with a four-year low of 48 in 2005.
The survey questioned Americans with annual adjusted gross income exceeding $300,000, or net worth above $5.9 million. Ninety-one percent of respondents said their investment portfolios had grown in the past year, compared to 81% in 2005. Only 3% said their portfolios had lost value. Mr. Napoli said that most wealthy investors were sitting tight with their asset allocations because they remain wary about the market.
