On the Hunt for HNW Clients? Look to In-House Investment Banks

Wirehouse advisors know that going independent allows them to earn more money and often provide their clients with a more comprehensive range of services and products. However, a common refrain among these advisors is that elite clients will not stay with them without ready access to banking solutions.

Yet, it seems that many high-net-worth individuals are considering making this move anyway. 

A recent PwC survey found that 46% of HNW investors plan to change wealth management providers or add new wealth management relationships in the next 12 to 24 months. That’s in addition to the 39% of respondents who said they had already switched or established an additional relationship.

While there are many reasons that affluent clients switch advisors, a lack of product access has been cited as a critical source of attrition, with over 27% of clients who have made a change in the past three years saying that they did so because their new advisor offered access to different products and services.

Affiliating with an independent firm that offers in-house investment banking capabilities can be a true differentiator for financial advisors looking to attract and retain high-net-worth, ultra-high-net-worth and business-owner clients.

For wirehouse advisors considering independence or independent advisors looking to expand their offerings with more sophisticated solutions for affluent and business-owner clients, partnering with a wealth management firm with investment banking capabilities could make a significant difference.

Increased Solutions for Affluent Clients

Many firms have alternative investment options on their product shelf, yet due to the complexity of the products and critical regulatory requirements, they are often limited in scope and can be similar to what other firms offer. By affiliating with a wealth management firm with an established investment banking arm, independent advisors can expand the investment solutions they offer wealthy clients who want more than cookie-cutter portfolio options.

Advisors at firms without capital markets capabilities aren’t able to offer proprietary deal opportunities to clients. They need to look elsewhere for initial public offerings, secondaries, public market equity and debt transactions. A firm with an investment banking arm can create such products and then meet the demand from internal advisors because the firm controls the book.

Access to internal resources and products can also give advisors greater trust in the solutions they recommend for client portfolios. Their firm will know the deal inside and out, and advisors can speak with members of the team responsible for putting the offering together. That is not possible when dealing with large institutions. 

Support for Business Clients

These same advisors’ business clients can also benefit from the investment banking team’s relevant industry relationships and network of internal and external operating resources to strengthen their businesses and enhance their value.

While wirehouses and money-center banks may have a lock on the most significant investment banking deals, smaller independent wealth management firms can focus on providing access to capital to mid-market businesses, which find it hard to get the attention of the large Wall Street enterprises.

Lower fees and higher costs drive large investment banks to avoid allocating resources to service middle-market companies due to the smaller deal sizes and smaller corporate infrastructure. This gap offers an opportunity for other firms to provide access to capital and support for the mergers-and-acquisitions-driven growth these businesses need.

This allows financial advisors to be aligned with these independent broker-dealers with capital markets functions, M&A support, and proprietary industry and company-specific research products to cater to mid-market business clients and offer complete investment banking and consulting services.

Many affluent clients generate their wealth by either owning successful businesses, selling them or expanding them to take advantage of new opportunities. These existing or prospective business clients are looking for more than typical wealth management services. They need advice and counseling on everything from mergers and acquisitions to finding strategic partners worldwide to take their business to the next level.

Having in-house investment banking options can dramatically increase an advisor’s offering and create opportunities to expand services to these critical client relationships.

Affiliating With the Right Type of Firm

Providing small and midsize companies with the capital they need to succeed and contribute to the U.S. financial system is vital to the economy’s overall health. Affiliating with a wealth management firm with this expertise differentiates advisors with sophisticated clients looking to access these growth opportunities.

It also allows advisors to offer a valuable service to their business-owner clients in search of a trusted partner to help them access capital markets. As wealth management becomes more consultative on the higher end, business owners will want more than help setting up a 401(k). They want to tap into the expertise of centers of excellence that understand different industries and markets.

With affluent clients more willing to switch advisors, access to a full range of in-house investment banking support can make a difference in attracting and retaining the best clients.

Craig Kaufman is managing director at Kingswood Investments, part of a network of independent wealth management firms that oversees more than $14 billion in global assets.