Sometimes clients hold assets away from their primary wealth managers because they don’t feel enough trust to place all their eggs in one basket.
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Other times, it’s because they don’t want to invite judgement of some of the ways they’ve chosen to invest. Most often, though, it’s simply inertia, says Merrill Chief Operating Officer Patricio Diaz.
Even with technological advances making it easier than ever to transfer assets, many clients don’t want to go through the hassle. That is, Diaz said, they don’t want to until a big change in their lives — often the sale of a business, retirement or a big inheritance — forces them to make a general reappraisal of their finances.
That’s when wealth managers that have taken care to build trust with clients are most likely to succeed in persuading them to move held-away assets over.
“Certain demands probably need to happen before clients say, ‘OK, now is the time to do it,'” Diaz said. “They tend to be more of those key moments where you say, ‘OK, now this is getting complex enough.'”
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Why it’s important to not come off as ‘pushy’
Like many in the industry, Diaz thinks clients ultimately benefit from the coordination on everything from tax management to estate and retirement planning that comes from entrusting most of their assets to a single firm. He and others at Merrill and parent firm, Bank of America, are also keenly aware that held-away assets present a giant business opportunity.
Eric Schimpf, co-head of Merrill Wealth Management, said during an investors day event last year that Bank of America has around 9.5 million customers who aren’t also Merrill clients. He estimated those clients have at least $10 trillion in investable assets and that bringing in just 1% of that would add $100 billion in assets under management.
Diaz acknowledged that firms have a fine line to walk when trying to convince clients that they are thinking of more than their bottom lines when seeking to manage more held-away assets. He said it’s important to not come off as “pushy” and to wait for moments when clients are most likely to be receptive to learning about the benefits of asset consolidation.
“You focus on the advice first, you build trust, and then you deliver good financial planning, good advice, good outcomes,” Diaz said. “Then the assets follow.”
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Only 19% of high net worth investors work with a single firm
It’s not just large firms that see strong business prospects in securing more held-away assets from existing clients. A Financial Planning survey of nearly 150 advisors in May found that 56% of the respondents plan to achieve their growth goals by increasing their “wallet share” with existing clients.
Yet, despite wealth managers’ concerted efforts to amass held-away assets, there are signs that investors have become more likely in recent years to work with more than one institution. In its latest World Wealth Report, the global consulting firm Capgemini found that only 19% of the respondents to a survey of 6,510 high net worth investors reported working with a single firm last year. That was down from nearly 40% in 2019.
Capgemini suggested that many high net worth investors are still having a hard time finding all the services they want in one place.
“Whether seeking access to alternative investments, tax optimization strategies or digital asset management, HNWIs are increasingly motivated to work with multiple providers rather than consolidating with a single firm,” according to the report.
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Bringing in assets through banking, workplace channels
Eager to prevent clients from turning elsewhere, Bank of America and Merrill are quick to point to the wide breadth of their offerings ranging from standard wealth management and banking to tax management, estate and trust planning, securities-backed lending and access to private equity, credit and other alternative investments. Clients will often come to either the firm’s wealth management or banking units seeking one kind of service and find they can benefit from many others.
Their assets many times follow. A business owner, for instance, may have enlisted a Merrill advisor for personal wealth management.
“But just naturally, they may cover an opportunity to say, ‘Hey, l have a financing need for the business and other things that some of our partners in the bank can help deliver,” Diaz said.
Another avenue to held-away assets firms are increasingly touting these days are their workplace divisions, which typically work with employers to provide benefits like retirement and stock-ownership plans. Morgan Stanley CEO Ted Pick, for example, has estimated that clients of his firm’s Morgan Stanley at Work workplace unit hold $5 trillion elsewhere.
“That’s $5 trillion of wealth held by those same people who work at company XYZ whose comp plan we already administer,” he said at an industry conference in 2024. “That’s what’s exciting.”
Away from Wall Street, the large regional firm Edward Jones sees a similar opportunity. The St. Louis-based wealth manager recently announced it’s adding retirement plans from J.P. Morgan Asset Management and T. Rowe Price to its offerings for businesses looking to provide employee benefits.
Norm Cauntay, an Edward Jones financial advisor in Long Beach, California, said retirement plans are a great way to start gaining a picture of a clients’ total asset holdings. Often the first encounter a young person has with a financial services firm is when they set up a 401(k) or similar type of savings fund.
“Then when they start understanding what’s happening inside their plan, they start wondering about how some of their other things that they’re doing outside the plan fit together,” Cauntay said. “That’s where you know their financial journey starts.”
From there, Cauntay said the conversation usually moves to convincing clients they’re rarely doing themselves a favor by stowing away assets in multiple places. Sometimes a little detective work is required to find savings in 401(k) plans started at previous employers and then forgotten following a change of jobs.
Above all, clients need to be able to provide a full account of their finances if their advisor is to help them to the fullest extent.
“It would almost be like going to your doctor and talking about one symptom and not talking about everything else,” Cauntay said. “Your doctor can’t really help your physical health in a more meaningful way, and I think the same thing goes on the financial health.”
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Convincing clients with multiple managers that they’re on ‘mission impossible’
Financial planners say there are circumstances when having more than one wealth manager can be counterproductive to a client’s interests. Scott Bishop, a partner and managing director at Presidio Wealth Partners in Houston, said he can see a scenario in which he recommends an investment in real estate without knowing his client already has substantial money in real estate investment trusts, or REITs.
“In that case, I’m actually concentrating, versus diversifying,” he said.
Bishop said he and colleagues at his firm with roughly $3.4 billion under management have the luxury of not having to accept every client who comes in the door. Often, he said, he’ll make it a condition not that the newcomers agree to move over everything they have held elsewhere, but that they at least let their advisor at Presidio Wealth know about it.
Some will want to keep a separate brokerage account for making trades on their own but will still want a Presidio wealth manager to provide research from time to time for transactions they’re considering. At such times, Bishop said the firm will consider charging a special assets under advisement fee for the needed work, which usually falls short of full asset management.
The same goes for money held in outside 401(k)s and other retirement plans.
“What I tend to do is, instead of charging specifically on those investments, I just charge them an annual flat financial-planning fee for that type of oversight,” Bishop said. “Because unless they have the ability to do a self-directed account within the 401(k), we’re usually just helping them look at a handful of mutual funds.”
Bishop said clients who keep their assets stored in many different places are ultimately putting themselves in a position where they have to “manage the managers.” They could sometimes stand to be gently reminded of that fact.
“I would say, if I at least don’t know everything, then it’s the client that’s trying to manage this process, which is basically mission impossible,” he said.
