Super Rich Are Super Popular with Brokers

The super rich are getting some super treatment from brokerage firms, perhaps at the expense of the plain old wealthy, according to The Wall Street Journal.

Merrill Lynch and UBS AG both have begun competing for top-tier clients, opening offices each with a specially trained cadre of advisers, to cater to those investors with $10 million or more to invest.

Some credit a strong market and skyrocketing real estate for creating a much larger group of super-wealthy.  Not only do such clients have special needs, but they typically pay hefty fees for banking services.

At UBS, accounts with $10 million or more have nearly doubled from about $48 billion worth in 2003 to $90 billion today. In response, UBS plans to open a New York office with 100 advisers dedicated to clients with $10 million or more to invest.

Merrill has created six private banking hubs recently, and has trained 300 of its 15,000 advisers to work in these and other offices, dealing with clients with $10 million or more. In 2005 alone, Merrill's assets under management in the $10 million-plus class rose 11%.

At Morgan Stanley, James Gorman is head of the company's rebranded retail brokerage unit, now known as the Global Wealth Management Group. There, almost one quarter of the firm's $633 billion client assets are in accounts of $10 million or more.

In 2005, Bank of America launched a division for clients with $50 million or more.  

"The large firms are recognizing they need a boutique brand with boutique service and are offering to service this very elite group," said Milton Pedraza, chief executive of the Luxury Institute, an research company focused on the wealthy. 

However, some say that the focus on servicing the really rich comes at a cost to smaller investors. For example, at Merrill Lynch and Smith Barney, clients with several million to invest may find themselves speaking with call center representatives, who usually handle investors with less than $100,000 in the market.

And it's possible that those call center representatives are not well equipped to serve all investors. That turned out to be the case at a number of Merrill Lynch call centers when the National Association of Securities Dealers in March socked the company with a $5 million fine because clients who heeded the advice from call center representatives to switch funds typically lost money. At the same time, Merrill conducted a contest, offering incentives to brokers who sold in-house funds. Merrill has since tweaked its call center service and reports clients are far more satisfied.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.