Is $5 Million the New Million?

In 2015, for the first time, more than one million U.S. households had a net worth of more than $5 million. 

A report from Phoenix Marketing International also estimates that the number of HNW households, those with at least $1 million in investable assets, has reached a new high of more than six million. 

How Can Bankers to the Rich Earn Their Fees?

Top banks and trust companies charge real money for wealth management these days, according to the WSJ.

Annual fee for managing $5 million: $46,500
For managing $20 $30 million: $201,000

To earn such generous compensation, says the Journal, a wealth manager needs to do more than allocate assets. No surprise there. More than three decades ago, when Daniel Davison ran US Trust, the bank depicted the breadth of its services by commissioning Winston Churchill's granddaughter to create a sculpture of a trust officer walking a client's dog.

Though wire houses and banks still dominate the high net worth market, the WSJ graphic shows independent advisers are nibbling voraciously at their business.

Corrected 3/26

Wealth and Worry

From The WSJ's Total Return blog:

Raising the bar. The threshold for "high net worth" is now $5 million.

Worry, worry, worry. A State Street Center for Applied Research survey finds, "investors don’t trust advisers, money managers don’t trust brokers and exchanges, regulators doubt their ability to police the markets, everyone thinks policymakers are incorrigible bumblers…."

Think Generations, Not Gender

On his latest radio show Ric Edelman remarked that women are taking greater responsibility for family investments. A generation ago, many wives managed daily family finances while their husbands toyed with the brokerage account. Today, much investing is done through 401(k)s and other retirement plans. Increasingly, it seems, the wife who monitors the family bank accounts keeps an eye on the family  retirement accounts as well.

Nevertheless, male wealth managers continue to wonder: What do women really want? Schwab seeks to provide guidance with a survey of "high net worth women," but note the quotes. Average investable assets for the women surveyed was only $1.3 million, making it unlikely that most qualified as high net worth. Half had no investment account. Four in ten had no credit card of their own.

For a meatier survey, see US Trust's 2012 Insights on Wealth and Worth. The study probes wealth-related attitudes by generation – pre-boomer, boomer and under 50. Boomers, it turns out, have relatively less interest in keeping wealth in the family. Under-50's are more likely to turn to private banks or trust companies for investment guidance.

The Rich Get Poorer

Gleanings from the NYT front-page story, Rise of the Super-Rich Hits a Wall:

• Monthly income from dividends on stocks has fallen more than 20 percent since last summer.
• The number of people with investable assets over $1 million dropped by about 500,000 last year.
• The Mei Moses index, which tracks the price of art, has dropped 32 percent in the last six months.
• The fortune of John McAfee, the antivirus software tycoon, has dropped from a high of $100 million to about $4 million. (Investing in Lehman bonds didn't help.)

Decline of the Demi-Rich

Wealth managers with clients worth more than $5 million should cherish and protect them. They're an endangered species. According to a Phoenix Marketing International study, U.S. households with investible assets of $5 million or more fell from 823,000 in June, 2008 to 675,000 as of last month. That's an 18% drop, far sharper than the 8% drop in high-net-worth households overall.

Note: Despite the Investment News headline, relatively few of those 675,000 households are truly rich, much less superrich. Even with the current deflation, a rich lifestyle generally requires at least $20 million; superrich, at least $100 million.

But even the formerly superrich can adjust to changing circumstances. Mr. Madoff's living expenses at his new home in North Carolina are said to be quite affordable..