Big U.S. brokerages chase the rich in departure from retail roots

Fri Jul 29, 2016 2:06am EDT
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By Olivia Oran and Elizabeth Dilts

NEW YORK (Reuters) - Big U.S. brokerages are redefining the term "wealthy" in their pursuit of ever-richer clients to prop up margins eroded by historically low interest rates and growing regulatory burdens.

Brokerages owned by Morgan Stanley, Bank of America Corp and Wells Fargo & Co have been using new incentives and penalties to push financial advisers to bring in more multi-millionaires and whittle down smaller accounts.

Clients with less than $750,000 are now considered "mass affluent," meaning they may not get the same service as top customers because their financial needs are simpler, said Kendra Thompson, who heads the wealth and asset management division of consulting firm Accenture. Industry sources say that figure was closer to $250,000 before the financial crisis.

In a departure from their decades-long commitment to all investors, brokerages are increasingly referring customers with as much as a couple hundred thousand dollars to call centers and digital advice platforms, executives and advisers say.

Rich investors not only have more assets to manage. They can also bring additional business such as estate planning or lending against fine art, they say.

Serving those clients "used to be about prestige, now it's about margins," said Jane Swan, a managing director who focuses on the wealth management industry at recruiting firm Sheffield Haworth.

The gradual shift toward clients with millions rather than hundreds of thousands to invest has accelerated in recent months, in part because of new rules on financial advisory services, executives, advisers and industry consultants say.

"All of these firms are mid-step in major transformations," said Accenture's Thompson.   Continued...

Images and market data is displayed on digital display signs on the exterior of the headquarters of Morgan Stanley at 1585 Broadway in New York's Times Square, September 16, 2015. REUTERS/Mike Segar