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Wealth management, or highnet-worth (HNW) investing, offers tailor-made financial advisory, investment (including alternative investments), financial planning, and management services. Wealth managers attempt to provide very specialized financial advice and to generate positive financial performance while adhering to client risk profiles. According to the 2005 CapGemini Merrill Lynch Wealth Report,1 this market represents about 8.3 million people, each with at least $1 million in financial assets, totaling about $30.8 trillion. This number is expected to reach $42.2 trillion by 2009, assuming a 6.5% annual growth rate.
Avery [2007] finds that, in Europe, multifamily offices and hedge funds are increasingly competing with private banks and wealth managers. Indeed, HNW clients appear to have only a tenuous loyalty to their wealth management providers, according to a survey by PWC and the Economist Intelligence Unit. This survey found that 43% of clients are considering changing providers and 31% said they remained with their provider only because of a lack of better alternatives. The survey also showed that the strength of the client relationship continues to be an important factor (Krebsbach [2002]).
Wealth management has obviously become one of the cornerstones of the financial industry and is thus a knowledge-based service. Knowledge-based services are typically provided by highly educated and well-informed employees who respond to specific client needs by delivering customized value-added solutions (Debély, Dubosson, and Fragniere [2008]). Due to their intangible and heterogeneous nature, analyzing knowledge-based services can be difficult. The life cycle of the service is determined by the contractual relationship between the provider and the client. Moreover, where production, for example, follows the logic of a supply chain, the "raw material" (or provision) of the knowledge-based service often comes from clients themselves, who may also intervene at various levels of the production process.
Most of the "productive" factors of services correspond to human qualities ("soft skills"), which are by nature subjective and therefore not quantifiable. The tenets of services marketing state that a service will generate a profit if its benefits are perceived by clients to be sufficiently valuable that they are willing to pay for it. Consequendy, any wealth management company needs to determine 1) what does the client expect? and 2) what does the client value?
Superior performance is certainly one of the main...