From Unmentionable to Unmeaningful

Up until the 1980s, I bet there wasn’t one reference to “wealth” or “rich people” in the  newsletters Merrill Anderson churns out for bank and trust companies. “Wealth” was unspeakable. Those who had managed to hang onto their fortunes during the Depression and World War II didn’t want attention. That meant newsletter articles had to signal their target market with euphemisms: people of means…affluent...with substantial assets…extensive resources.*

In the 1980s a new Boomer financial elite emerged – “If you’ve got it, show it!” William Safire noticed the trend in a 1981 On Language column. The New Money, and those aspiring to it, were talking fancier:

Only fuddy-duddies go to the gym, or to the drugstore, or to Europe; the upscale (formerly hoity-toity) crowd goes to the spa, or to the pharmacy, or to the Continent.

*** 

A decade ago, the passé people would say rich while the with-it types would say affluent; now the passé say affluent and the with-its say wealthy….

Wealth was mentionable again! And just it time.  Investment advisers faced a marketing challenge. Index funds had emerged, diminishing the perceived usefulness of active investment management. Advisers were responding by broadening their services – more estate planning, retirement planning, tax planning. Now they needed a term to describe their broader role – something with more pizazz than "financial planning."

Thanks to the renewed acceptability of "wealth," the solution was simple. Investment advisers became wealth managers. By the 1990’s the term “wealth management” had soared in popularity, as  this Google Ngram indicates.

"Wealth management" was a big-tent concept. Brokers offered it, insurance companies spun off wealth management units, bank trust departments hurried to rename themselves. Now, well into the 21st century, familiarity has bred confusion. 

Most people now think wealth means something nice but vague, Yale researchers have found. Who can blame them? Many years of marketing campaigns have told them "wealth is a life well lived," "wealth is peace of mind and happiness."

Only about one person in five, said the researchers, knows that wealth is what you have left after subtracting your debts from your assets. 

* On TV the other day I heard poor children euphemized as “under-resourced kids." 

What’s “Wealth”? Most Americans Aren’t Sure

According to Yale researchers, most Americans underestimate the wealth gap between white Americans and black Americans. Most also have trouble defining “wealth."

Wealth can be a difficult concept to get ahold of. If you get into the weeds, economists and accountants may disagree about what exactly should be counted. But for a basic definition wealth is assets minus debts. In our own samples, when we ask people to define wealth, only about 20% of our respondents are getting that right. Most talk about money along with things like values. That’s consistent with the messaging of asset management firms. Their websites have testimonials that highlight happiness, retirement, and providing for your family. Whatever the reason, the study participants don’t understand wealth well.

Two Ways to Wear a Suit Like a CEO

As annual reports for 2018 appear, notice the crumbling of the business dress code. White shirt and tie is giving way to tieless blue shirt.

Pfizer's CEO photo shows him in suit and tie. Ditto for Bank of America's CEO. But AT&T's CEO photo shows that he has joined the tieless, unbuttoned blue-shirt rebellion. So has Citi's.

AT&T's CEO

CEOs of troubled companies, however, need to look as somber and serious as possible. Leaders of GE and Wells Fargo still wear ties.

JPMorgan Chase's report isn't online yet, but Jamie Dimon presumably will appear with tieless blue shirt as he did a year ago.

For traditionalists, worse is yet to come. The disappearing tie, the WSJ suggests, will be followed by the disappearing business suit. Already, shoppers at the Joseph A. Banks store in NYC have to sidle past displays of khakis and jeans and head upstairs in order to find suits.

West Coast techies are to blame, of course. Judging from photo evidence, the only time Apple's Tim Cook wears a suit is when he visits the White House.

The crumbling dress code leaves wealth managers with a serious challenge, Which fashion look will impress the client – Armani or Lululemon?

The Agonies of Wealth

Why can't I be sure I won't go broke?
Why can't my money buy love?
Why doesn't my money boost my self esteem?
Is everyone after my money?

The average member of Tiger 21 has over $87 million in investable assets. (It takes a minimum of $10 million to join.) Yet the Tiger 21 member mentioned in this NY Times story finds wealth a source of anxieties and insecurity.

Many Times readers, including your obedient blogger, find it hard to sympathize with the burdens of life as an UHNWI.

Wealth managers, on the other hand, welcome the new-business opportunities offered by traumatized Gilded Agers. Wealth worries also help support groups such as Tiger 21 and (minimum wealth $30 million) the Institute for Private Investors.

Wealth Management Clients Should Be Careful with Their Checks

Frank Abagnale Jr. ("Catch Me If You Can") in a WSJ interview:

Think about this: You go into a convenience store today and write a check for $9. You have to hand the clerk the check with your name and address, phone number, your bank’s name and address, your account number at your bank, the routing number into your account. That’s your wiring instructions. Your signature that’s on the signature card at your bank. And then the clerk has written down your state driver’s license number on the front and your date of birth. You don’t get the check back. You can get an image of the check; the physical check goes to [the store’s] warehouse, where eventually, six months from now, they will destroy it. 

In the meantime, anyone who would see the face of that check—from the clerk who took it at the counter to the one that made the night deposit—could draft on your bank account tomorrow, would have all the drafting instructions. Or they could go online [and order checks] that look exactly like your checks, but put their name on it and put your account number on it. So every check they write gets debited against your account. It’s so simple to do. 

It’s amazing to me that people are writing $9 checks from their wealth-management account, their private banking account, and giving them to some stranger in a store.

Perfectly Placed Wealth Management Commercial

BNY Mellon's Joe Montana commercial, introduced last summer, fit in beautifully during today's NFL coverage.

On BNY Mellon's web site, the scripted commercial is billed as a "candid interview." Huh?

Less Banking, More Wealth Management?

Fitch, the rating agency, has seen the future of U.S. banking. It's wealth management.

Wealth management, including advisor-based guidance and asset management, provides recurring sources of income and requires less capital usage than traditional bank loan products.  Wealth management services can strengthen and make stickier relationships with good customers, which tend to provide additional deposit funding, as well as opportunities for cross-selling a bank's core products, such as mortgage lending.

Digital Wealth Management

Online investing is heating up.

Wealthfront just grabbed another $70 million in financing. Personal Capital raised another $50 million. Charles Schwab announced its own robo-advisory service.

Will the Boomers' children be the generation that abandons face-to-face investment services?

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 Managers, Beware of Hackers

“The Nigerian prince email swindle, in which a supposed royal offers riches in exchange for a bank account number, is to today’s phishing scams what a Brother word processor from the 1980s is to a MacBook.”

Paul Sullivan in The New Hork Times warns that bad people have become highly skilled at draining money from the accounts of wealth managers' clients.

A security executive at a trust company told of a hacker who got creative in trying to fool the firm. The executive, who requested anonymity, said the firm received an email from a client’s account asking that $137,000 be wired to Italy to buy some art. He said this client was part of a large family that traveled frequently, so the request was not odd on its face. But he said the family had put a procedure in place in which no wires went out without a call being made to the person requesting the money.

 One security tip for investors that hadn't occurred to me: Don't keep documents bearing your signature in your email.

Was Nobody Wealthy Before 1980?

Thanks to John Mauldin for sharing Dylan Grice's The Language of Inflation. Brice enlivens his critique of the Great Credit Inflation with examples of changing word usage as charted by Google's Ngram Viewer.

The term "wealth management," for instance, surged in the 1990s. Before that, memories of the Great Depression made people wary of flaunting their wealth. Besides, it wasn't good form.

Today, "wealth management" often has little to do with real wealth or real management. Grice illustrates with a story:

[W]e attended a lunch recently in which one … “wealth manager” was promoting his services to those around the table. An Italian gentleman claimed to be relieved to have finally found someone who could help him. “At last!” He gasped after the banker’s pitch, “I could really use some help managing my family’s wealth. We own vineyards and a processing plant in Italy, some land and a broiler farm in Spain, some real estate scattered around Europe and the Americas... We are fortunate indeed to have such wealth, but managing it all is increasingly challenging. Can you help?” 

The poor banker looked forlorn. Of course, he didn’t mean that kind of wealth, the old-fashioned, productive kind of stuff. He meant the modern, papery, electronic kind. The stuff that blinks at you all day from a screen.

Grice offers food for thought, although I can't get my head around his reference to"no inflation over the last thirty years." Do I pay more than twice as much today because everything is more than twice as good?

50 Wealthiest Members of Congress

Looking for wealth to manage? Try Capitol Hill. Some members of Congress have made big money, others have inherited big money, still others married big money. The Hill lists the top 50.

Wealth Mismanagement in Texas?

Not long after Invesco announced the sale of Atlantic Trust Wealth Management to CIBC, the head of  Atlantic Trust's Austin, Texas, office was found dead.

Now, The Wall Street Journal reports, "investors have come forward to say they lent him in total millions of dollars, according to people familiar with the matter. At least some of that money appears to have gone missing, the people said."