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Due Diligence
Private Banks Encouraged to Eat Your Lunch

Private Banks Encouraged to Eat Your Lunch

Looking for the sweet spot? You will likely find it among a group McKinsey & Company is calling the Core Millionaires, the 4.2 million households in the U.S. with between $1 million and $10 million in assets. In fact, this group compares favorably to those with even more riches—the ultra-high-net-worth, those with $10 million or more in assets. McKinsey says core millionaires will generate close to two-thirds of asset growth in wealth management and nearly 80 percent of all net new revenue growth by 2015. They also deliver revenue margins that are two to three times the average for the UHNW, and at a lower cost.

But here’s the rub: in a March report titled “A Tale of Two Millionaires,” McKinsey urges private banks to downshift, focusing more of their attention on the core millionaires and less on the UHNW, where it is currently concentrated. That means more competition for full-service retail brokers and financial advisers who cater to this core millionaire segment. Lead author Jill Zucker says there is an opportunity here for private banks because full-service brokers tend to struggle to move beyond the investing basics—equity transactions, some alternatives, mutual funds and ETFs—to more bespoke or proprietary products when providing advice to wealthy clients.

Already, full-service brokers have been losing market share in this client segment. See below:


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