Understanding wealth management

Date: 01 Dec 2006

Citywealth

I get asked so many puzzled questions about what hnwi’s are and what exactly you do that I thought I would offer a rough guide to wealth herewith.

Affluent (well off person)Up to £2million

HNWI: High net worth individual (rich person) with £2-20million

UHNW: (very rich person)Ultra high net worth £75million and above to several billions

VUHNW:(richest people in world)Very or Ultra ultra high net worths are billionaire and multi billionaires.

Family office entry level is generally accepted as client with ¬£250million and above. A family office is an entity set up where you hire an accountant and lawyer full time and investment manager to work for you. It is not worth setting up with less than this amount of money to invest because you waste a lot on fees. Wealthy people set them up because they get independence from private banks and investment managers who try andsell their own products or products which they are gettingpaid for. Americans do set them up for much less money but they are a more evolved community than us and see it as part of their bragging rights iesomething to have after you’ve got two houses, two cars and two kids. What next? It is almost a badge of honour and sophistication.

However Multi family offices is where you get one family office structure invite other families to participate in their knowledge. They are sometimes criticised for losing independence and becoming more like a bank ultimately. A survey I did said stick to the top five recommended by our readers for they have focused on quality attention to clients and a sophisticated structure but there are of course other options like using trust structures to run affairs (with people like Key Trust, Jersey and Close Trustees, Switzerland for instance).

There are also US players like Northern Trust who are now pushing into this space with a part commoditised part bespoke offering for clients with $75million and above.