Private wealth management (PWM) is the term generally used to describe highly customized and sophisticated investment management and financial planning services delivered to high net worth investors. Generally, this includes advice on the use of trusts and other estate planning, vehicles, business succession or stock option planning, and the use of hedging derivatives for large blocks of stock.
Traditionally, the wealthiest retail clients of investment firms demanded a greater level of service, product offering and sales personnel than were received by the average clients. With an increase in the number of affluent investors in recent years, there has been an increasing demand for sophisticated financial solutions and expertise throughout the world.
The CFA Institute curriculum on "Private Wealth Management" indicates that there are two primary factors that distinguish the issues facing individual investors from those of institutions.
The term was first used by the elite retail (or "Private Client") divisions of firms such as Goldman Sachs or Morgan Stanley (before the Dean Witter Reynolds merger), to distinguish themselves from mass market offerings, but since has spread throughout the financial services industry. Certain larger firms (UBS, Morgan Stanley and Merrill Lynch) have "tiered" their platforms – with separate branch systems and advisor training programs, distinguishing Private Wealth Management from "Wealth Management", with the latter term used to describe the same type of services, but with a lower degree of customization and delivered to mass affluent clients. At Morgan Stanley, "Private Wealth Management" is the retail division focused on serving clients with greater than $20 million in investment assets,[2] while "Global Wealth Management" focuses on accounts smaller than $10 million.
In the late 1980s private banks and brokerage firms began to offer seminars and client events designed to showcase the expertise and capabilities of the sponsoring firm. Within a few years a new business model emerged – Family Office Exchange in 1990, the Institute for Private Investors in 1991, and CCC Alliance in 1995. These new entities were devoted to educating the ultra wealthy investor and providing a network of peers for the ultra high net worth individual and their families. Their growth since the 1990s indicates a market eager to become more informed about private wealth management.
Wealth management education for private investors with substantial wealth is offered by several leading universities. The first such program was offered by the American Academy of Financial Management (now branded as the AAFM Global Academy of Financial Management) who offers the CWM Chartered Wealth Manager Program and then the Wharton School of the University of Pennsylvania. Since 1999, over 5000 people from over 100 countries have completed the AAFM CWM Wealth Manager program. [3] At Wharton, 520 investors from 29 countries have completed the course.[4] The five-day program is offered twice a year and is a continuing partnership with the Institute for Private Investors. Both The University of Chicago and Stanford University also offer 5 day programs. In 2009, Columbia University offered a three day program on value investing designed for high net investors Wealth management can be provided by large corporate entities, independent financial advisers or multi-licensed portfolio managers whose services are designed to focus on high-net worth clients.[5] Large banks and large brokerage houses create segmentation marketing-strategies to sell both proprietary and non-proprietary products and services to investors designated as potential high net-worth clients. Independent wealth managers use their experience in estate planning, risk management, and their affiliations with tax and legal specialists, to manage the diverse holdings of high net worth clients. Banks and brokerage firms use advisory talent pools to aggregate these same services.