Targeting “Underserved UHNW” Clients: What’s the Growth Opportunity for RIA Firms?

James Miller, Contributing Editor, Wealth Solutions Reporter

Venturi Private Wealth’s Russ Norwood on Effectively Engaging with First Generation Creators of Multigenerational Wealth

The ultra-high net worth (UHNW) landscape has been undergoing enormous changes over the past two decades, driven by multiple trends.

Put simply, there is a greater level of diversity when it comes to the age, gender and geography for individuals and families considered to be UHNW (frequently defined as at or above $25-$30 million in net investable assets).

The stratospheric growth of the technology sector as well as certain segments of financial services (especially private equity, hedge funds and venture capital) has minted new multimillionaires, centa-millionaires and billionaires with starting frequency since 2000.  

Underserved UHNW Clients

While politicians and policymakers will continue to debate the extent to which the rising tide of economic growth has lifted all boats, the basic roadmap for how to join the ranks of the UHNW segment has altered substantially.

Unlike the old days, when you either inherited wealth or only built it up over most of your lifetime, we are continuing to see massive wealth accumulation by a broader set of our population.

But as the ranks of first generation creators of multigenerational levels of wealth rises, we’re now also seeing members of the UHNW segment feeling underserved and eager to switch financial advisors.  

In many instances, these are newly mega-wealthy individuals and families that didn’t feel as if they were receiving red carpet treatment from their financial advisors at global banks and Wall Street wirehouses when there was no U preceding their HNW status.  And they remember it.

Call them the “underserved ultra-high net worth” segment, or U-UHNW.

Capture and Serve

Venturi Private Wealth, with headquarters in Austin, Texas and satellite offices in Oklahoma City, could serve as a case study for how independent UHNW wealth managers can best capture U-UHNW clients and turn them into satisfied UHNW relationships.

Founded in 2015 by CEO Russ Norwood, who departed from a lucrative, multi-decade career at Merrill Lynch to launch an independent firm focused on serving first generation wealth creators, Venturi Private Wealth has grown at a dramatic pace.

In January 2016, Venturi Private Wealth’s total client assets were $500 million, compared against the firm’s total assets today of over $2 billion, supported by a team of 30 employees.

Venturi Private Wealth’s clients typically have a net worth in the range of $25 million to $50 million but this can – and frequently does – include valuation of closely-held business prior to a liquidity event.  And that’s where the firm has distinguished itself from the rest of the UHNW pack, with a very strong appeal to the first generationally wealthy.

WSR caught up this week with Norwood to share his thoughts on the emerging U-UHNW segment of wealth management, why they feel underserved and what he and his team are doing differently to capture and support this client demographic.

WSR:  The very concept of an “underserved ultra-high net worth” (U-UHNW) client sounds like an oxymoron – How would you describe the typical U-UHNW client, and how did they get overlooked by the wealth management space?

Cookie-cutter services don’t cut it for underserved UNHW.

Norwood:  It does sound tough to believe there are underserved UHNW clients out there, until you look further at the details.

More often than not, we’re talking about the founders or owners of closely-held businesses who experience a major liquidity event through the sale of all or part of the enterprises they’ve built.

Suddenly, these individuals go from a liquid net worth of $1 million or $5 million to a liquid net worth of $30 million, $50 million, $100 million or more.  

These first-generation wealth creators frequently didn’t have a significant amount in net investable assets until their liquidity events.  This means they generally received cookie cutter service from their financial advisors at global banks and Wall Street wirehouses.

So, when their individual financial picture changes, these clients frequently change advisors as they often feel they have outgrown their current relationship.

WSR:  Are there major cultural differences between first generation wealth creators and other members of the UHNW client segment?  What kind of firm culture best aligns with this sort of client?

Norwood:  There’s a tremendous cultural difference in how to serve first generation UHNW clients versus their heirs and descendants – And it’s a difference that isn’t fully acknowledged by many wealth managers.

Switching financial advisors – you’ve gotta know when it’s time to turn the page.

When a client is a first-generation creator of an intergenerational level of wealth, he or she is going to be much more sensitive about how to best equip their children and subsequent generations for effective wealth preservation.  

And when a new member of the UHNW segment speaks to a wealth manager who directly or indirectly assumes the client was born into some measure of wealth already, the conversation falls flat.

By contrast, Venturi Private Wealth not only embraces sophisticated wealth planning and management, we were launched less than a decade ago with an incredibly entrepreneurial culture and team.  

As such, we tend to mesh well with first generation UHNW clients who might feel like a fish out of water culturally with other wealth managers who cater to this segment.

WSR:  Why don’t the global banks and wirehouses succeed in keeping these types of clients after they enter the UHNW segment after a major liquidity event of some kind?

Norwood:  In most instances, it’s not really about why global banks and Wall Street wirehouses can’t retain clients who enter the UHNW segment because of a major liquidity event.

Prior to a liquidity event, the first-generation wealth creator is often relatively illiquid. If they have an advisor, it is commonly a small retail relationship.  Overnight, they can have complex needs that aren’t commonly addressed by most retail advisors and retail firms. 

This can be an uncomfortable and overwhelming transition and the first-generation wealth creator often seeks out expert advice to address their new complexity.  Private banks have traditionally done a good job of attracting these clients away from their incumbent relationship.  

At Venturi, our goal is to be one of the few, if not the only, independent firm at the table when these clients go through the resulting advisor interview process.  Our success winning these mandates has fueled our growth of over 30% per year for the past five years. 

WSR:  What is that U-UHNW clients are looking for with their wealth management firms that Venturi Private Wealth uniquely succeeds in delivering?

Norwood:  First and foremost, we’re focused on being the preeminent UHNW and HNW wealth manager for the Southwest region of the country.  We’ve always been committed to this region, and we’re homegrown.  

National firms have started to wake up to the importance of having a real presence in places like Austin, Texas, but UHNW clients looking for a firm that really knows the region and its culture tend to gravitate to us.  Our objective is to build a strong regional partnership in high growth markets with like-minded financial advisors. 

Next, we’ve actively invested in our people, platforms and processes to be able to meet and – in many cases – exceed the capabilities and expertise offered by global banks and Wall Street wirehouses offer to UHNW and HNW clients.

Our team of multidisciplinary client service professionals bring deep experience across investment strategy, financial planning, estate planning, tax-smart portfolio construction and alternative assets.  We work collaboratively to bring together each of these key functions in an integrated and high touch service experience for our clients.  We have very deliberately built a multigenerational team because we often serve a multigenerational client.

Nothing is impossible with hardwork, commitment, and dedication

Another illustration of our unique capabilities can be found with our alternative investment platform.  We have a major commitment to alternative investments and private equity at Venturi because it is important to our entrepreneurial clients.  

This year, we hired the former Director of Private equity of the $35 billion Texas Municipal Retirement System, Christopher Schelling, as our Director of Alternative Investments. Sylvia Bell, CPA was the COO of the Investment Management Division of the $180 billion Teachers Retirement System of Texas.  We are a unique team specifically built to serve the needs of UHNW clients.

WSR:  We touched on culture earlier.  Could you expand on that, especially in terms of what culturally seems to resonate the most with UHNW clients and prospects?

Russ Norwood, Founder & CEO, Venturi Private Wealth

Norwood:  Perhaps the biggest differentiator that we offer to underserved UHNW clients is the fact that we can match their entrepreneurial energy and outlook with our own.

As just one of many examples, we recently brought aboard a client who runs a very successful professional services business with offices throughout the Southwest, and hundreds of employees.

We had a terrific initial conversation, but what was especially remarkable about our dialogue is how we reached the end of our scheduled meeting, and the client asked for more time to dive deep on how I quit my job at Merrill Lynch PBIG over six years ago to launch Venturi Private Wealth, and the incredible growth we’ve been able to create since then as a team.

It was a real moment of connection that underscores how crucial it is for first generation wealth creators to feel they have a wealth manager who shares their drive and approach to life. 

James Miller, Contributing Editor & Research Analyst, can be reached at ContributingEd@wealthsolutionsreport.com

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