Luxury Institute News

November 17, 2015

Family friction perceived as biggest wealth management obstacle: report

Luxury Daily
November 16, 2015
By: Forrest Cardamenis

Family disputes are the largest hurdle for achieving financial goals, but communication can make things easier, according to a new report by SEI Private Wealth Management and Scorpio Partnership.

Working through financial decisions in isolation or failing to communicate effectively can disintegrate a family’s wealth far more quickly than it was accrued. As the luxury market continues to globalize and make the economy more volatile and interdependent than ever before, ultra-high-net-worth individuals will need to be smart and confident with money.

“[Wealth management is] a fundamental skill of survival,” said Jeff Ladouceur, director, SEI Private Wealth Management. “There is a secret sauce of academic skills and taught values on how to manage money, how to put it towards a good purpose or to continue to develop it.

“Without those skills, the money can be misused or become detriment, instead of an opportunity or jumping off point for success,” he said.

“Breaking The Taboo” looks at 275 individuals averaging $18 million in assets and $616,000 in annual income and their attitudes toward finance management. Among the participants, 42 percent are employees, 23 percent are entrepreneurs and 13 percent are retired.

Alone in the dark
The report identifies three major solutions to problems that impose proper wealth management: engaging more often to end conflict festering beneath the surface, introducing heirs to the decision-making process at a younger age and making decisions together.

When it comes to personal finance, people have confidence in themselves rather than family. Forty-three percent of participants said family interference stops them from achieving financial goals, compared to around one-third percent blaming their investment skills or lack of sufficient time and information.

mercedes family
Family prepares for a road-trip; image courtesy Mercedes

Accordingly, one-third said they must make financial choices alone, with the number increasing along with household net worth and higher for women and employees. However, family friction is often an indication of insufficient communication in the past, meaning more conversation and trust.

This isolationist mode of thinking might be an effect as much as it is a cause.

Only about 40 percent of UHNW parents involve children 19-years-old and under in family wealth issues and 80 percent say their heirs do not know how much they will receive. If this was true of the previous generation as well, the exclusion might have contributed to a reluctance to involve others.

Similarly, only 20 percent have given their children training or education on wealth management – this despite 85 percent believing that with great wealth comes great responsibility.

Affluent family
Affluent family

Fifty-eight percent of respondents are male while only 42 percent are female, a result of the lack of gender parity among UHNW individuals. Within the UHNW community, men and women behave differently: one-third of women lack confidence in their financial plan compared to just a quarter of men, but men are also only half as likely to trust family in financial matters.

By setting goals, teaching children how to understand and manage money and getting family and professional wealth managers involved in important decisions, UHNW families can take better care of both wealth and family.

Breaking taboos
Other studies indicate changes in wealth management are on their way.

Millennial investors have different preferences compared to their baby boomer parents when it comes to wealth management, according to a Luxury Institute report from August.

While baby boomers and older generations prefer to work with full-service brokerage firms, wealthy millennials and members of Generation X are showing an increased preference for working with private advisors. Independent financial advisors can offer a more individual approach that is often appealing to younger investors who are accustomed to personalization.

An SEI report from June suggests the same.

When the world’s emerging wealthy population is looking for financial advice, they are preferential toward relationship managers over product specialists, according to a report by SEI.

In the United States, high-net-worth consumers show an even higher affinity for relationship managers, favoring them over specialists two to one across all areas of investment. As regulations place restrictions on the client-advisor relationship and digital solutions appear poised to replace personal contact, this report shows the continued importance of human interaction in the investment process.

“People are doing more values-based than just budget-based financial education,” Mr. Ladouceur said. “People who are doing it right, the education is values-based.

“This means people are learning not only the basics of what they can spend and what they have, but also learning the relation between money and their family’s values,” he said. “Therefore, educated decision are made not on affordability but on alignment with need and values.”


August 14, 2015

Millennials’ wealth management preferences differ from boomers: report

Luxury Daily
By: Kay Sorin
August 14, 2015

Millennial investors have different preferences compared to their baby boomer parents when it comes to wealth management, according to a new report by Luxury Institute.

While baby boomers and older generations prefer to work with full-service brokerage firms, wealthy millennials and members of Generation X are showing an increased preference for working with private advisors. Independent financial advisors can offer a more individual approach that is often appealing to younger investors who are accustomed to personalization.

“Independent financial advisors are able to do more things for their clients, because they are not working for a firm that has rules and regulations about what they can or can’t do,” said Milton Pedraza, CEO of Luxury Institute, New York. “The IFA is the fastest growing industry in wealth management.”

Different strokes
Luxury Institute surveyed investors earning at least $150,000 and found that at least 46 percent used some form of advisor to help them manage their finances. Among respondents aged 65 and over, this number rose to 59 percent.

Michael Kors affluent couple car
Wealthy millennials are inclined to prefer independent wealth managers

Respondents varied in their preferences for an independent wealth manager versus a full-service brokerage firm such as Morgan Stanley or Merrill Lynch. Interestingly, this preference strongly correlated with age.

“A full service firm doesn’t have a fiduciary relationship with the client, meaning that they are not legally obliged to serve the client’s interests only,” Mr. Pedraza said. “They can recommend an investment in which they will make a bigger commission.”

Millennials and members of Generation X and Y, defined as those 45 and younger, showed a significant preference for independent wealth managers compared to full-service brokerage firms. Thirty-eight percent chose to work with individual advisors while 27 percent preferred a big brokerage firm.

Michael Kors case
Millennials have access to more information and are well informed

Investors over 65 were much less likely to work with an independent advisor and only 28 percent reported doing so. They strongly preferred to go full-service with 56 percent using large firms to manage their wealth.

This difference between the generations is likely a result of their upbringing. Baby boomers were raised to expect to work with a big brokerage firm, while millennials may be more wary and distrustful after the recession of 2008.

Sotheby's London Property
Financial advisors can assist in major life decisions such as purchasing a home

Additionally, millennials have more information at hand, which allows them to be more selective with their advisors.

“Millennials are so much more informed that they depend less on a brokerage firm providing them with research,” Mr. Pedraza said. “Millennials don’t need as much because they are so informed.

“They know that very few financial advisors can outperform the market in the long term.”

One way in which individual advisors often distinguish themselves is by providing a more personal connection for clients. Luxury Institute found that expertise, trustworthiness and generosity were the most valued traits in financial advisors.

Affluent family
As millennials age they are in greater need of financial advice

More than numbers
Investors looking for both a personal relationship and a full-service brokerage firm may seek other solutions to find the ideal compromise. Ultra-affluent consumers often appreciate the relationship-building culture fostered at boutique wealth management firms, according to a report by the Luxury Institute.

The New York-based Rockefeller Wealth Management firm received the highest score in the report, followed by Atlanta-based Atlantic Trust Private Wealth Management and Convergent Wealth Advisors. As wealth management firms continue to repair their reputations following the financial crisis, prioritizing relationships over transactions will be important (see story).

Regardless of the size of a firm, relationships are often the deciding factor when it comes to choosing a financial advisor. To differentiate themselves from competitors, wealth management companies must make crucial changes that will only work if the alterations are part of the company’s core DNA, according to a speaker from the 2012 Forrester Customer Experience Forum.

It is no longer enough to just return calls and give a great customer experience, since clients at wealth management companies are not even thinking about those that do not require this. Instead, Morgan Stanley Smith Barney was forced to bolster its customer service in terms of technology, getting to know the customer and its consultants (see story).

Looking forward, it is essential for wealth management companies to take personal relationships into account in order to appeal to wealthy millennials.

“Millennials will be keen to stay with those who deliver and will dispense with those who don’t,” Mr. Pedraza said. “They will choose advisors based more on the client’s experience than on the client’s return.

“The baby boomers are kind of exiting the stage. Millennials will demand a far more objective and independent metric.

“Advisors need to be completely trustworthy and very responsive,” he said. “They need to go above and beyond to make the client feel special.”


August 27, 2014

In the Loop, At the Half With Betty Liu

Betty Liu
Bloomberg Radio
August 27, 2014

Milton Pedraza’s segment is featured at: 9:35-15:11

March 17, 2014

Wall Street Shares Wealth, for Better or Worse

By: Martha C. White
NBC News
March 15, 2014

The $26.7 billion in bonuses that Wall Street hauled in last year will help fill city and state tax coffers, and certainly boost retailers when bankers sport Patek Phillipe wristwatches and slip into Maseratis. But all that green is a double-edged sword for New York City.

Wall Street bonuses grew by 15 percent in 2013, to an average of $164,530, according to the New York State Comptroller’s office. Milton Pedraza, CEO of research firm the Luxury Institute, estimated that Wall Streeters spend between half and three-quarters of their bonuses, then save or invest the rest, and about half the amount they spend is funneled into the local economy.

Because they spend an incredible amount of money in their jobs, “I think that spills over in their personal life,” said David Friedman, president of research and consulting company Wealth-X.

Click the link to read the entire article:

January 11, 2014

Tiffany results signal caution among luxury shoppers

By Jonathan Berr
CBS News
January 10, 2014

Shares of Tiffany & Co., whose name has been synonymous with luxury since before the Civil War, fell Friday after the second-largest luxury retailer said its earnings would be less than analysts had expected.

The New York-based company expects to earn $3.65 to $3.75 per share in the fiscal year ended January 31. While that forecast is unchanged from a previous forecast, it was below the $3.79 that analysts surveyed by Bloomberg News had forecast.

This is the latest sign of the uneven performance of many retailers during the holiday season despite the improving performance of the U.S. consumers. Wealthy consumers appear to be less enthused about buying goods and services than many experts predicted.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:

Spread the wealth, share!

December 25, 2013

Post-Twitter IPO: “Suddenly everyone thinks you’re Santa Claus”

By Mark Garrisson
December 24, 2013

Twitter may be the most famous company to go public this year, but 2013 was a monster year for IPOs in general.

And initial public offerings can bring big money to employees, on paper at least. Things can get a little awkward this time of year for the newly-rich, as certain friends and family members raise their holiday gift expectations. Strike it rich with an IPO, and suddenly everyone thinks you’re Santa Claus.

“You find you have relatives and friends you never knew you had,” says Doug Wolford, president and COO of Convergent Wealth Advisors. “I’ve known people whose friends have, you know, asked them to pay off their cars, take them on trips to the Super Bowl, you name it.”

Pressure to spend big is intense and not all external.

“The individuals themselves begin to feel guilty, feel like they do have to step in and solve a lot of the problems for the people they love. So it’s kind of a two-sided issue” says Luxury Institute CEO Milton Pedraza.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:

October 16, 2013

Top Earners Recover Their Losses, and Then Some

By Annie Lowery
New York Times
October 15, 2013

FOR most Americans, the economy over the last 10 years has felt like a slog interrupted by a punch: the recession came amid years of stagnation. But for America’s top earners, the experience has been more like whiplash: a boom followed by a bust followed by a boom.

Call it the 1 percent boomerang. The country’s top earners lost huge sums during the recession, as housing values plummeted and the stock market crashed. But the recovery has restored those fortunes — and then some, for some people — and created tremendous new ones.

The trend starts with the merely quite well-off, households earning more than about $150,000 a year. And the sums become more exaggerated higher up the income scale.

Click the link to read the entire article which includes multiple quotes from Milton Pedraza, CEO of Luxury Institute:


September 17, 2013

Regional Banks And Wells Fargo Deliver Winning Customer Experiences

(NEW YORK) September 17, 2013 – The Luxury Institute’s new survey asked wealthy U.S. clients with a minimum household income of $250,000 to rate multiple aspects of their primary bank from a list of national and regional banks.

Evaluations of convenience, staff, company principles, and products and services yield a composite Banking Customer Experience Index of 1-10. Wells Fargo stands out with the highest composite score and also leads in each of the four sub-indices.

Smaller banks beat out Bank of America and Chase for having knowledgeable, trustworthy and respectful staff. Bank of America earns the lowest overall score but still holds the biggest market share of high-income clients. Chase consistently ranks between Bank of America and Wells Fargo and has the second largest market share of all rated consumer banks.

Despite shortcomings of bigger banks, Bank of America, Chase, Wells Fargo and Citi Bank customers are far more likely (45% vs. 27%) to open a new account with their existing bank as compared to current customers of smaller banks.

“There is an opportunity for big banks to bridge the customer experience gap between themselves and their smaller competitors by focusing on developing a unique Customer Culture to deliver value for all segments of customers, and especially the top customers who deliver most of the profits,” says Luxury Institute CEO Milton Pedraza.

About Luxury Institute (
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Luxury CRM Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

September 5, 2013

Ferragamo CEO Quells Buyout Talk as Growth Surges in U.S., China

By Andrew Roberts
September 4, 2013

Salvatore Ferragamo SpA (SFER) Chief Executive Officer Michele Norsa quashed speculation of a buyout, saying the luxury shoemaker has the financial resources to fund expansion as growth accelerates in China and North America.

“I don’t see any reason” for a sale, Norsa said today in an interview on Bloomberg Surveillance with Tom Keene. A 2011 initial public offering gave financial freedom to members of the Ferragamo family, and the Florence, Italy-based company is generating greater-than-expected free cash flow, he said.

“If you become big enough you can survive alone,” Norsa said.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:

July 22, 2013

Are These “Artsy” Picks Safe From e-Tailers?

By Arturo Cuevas
The Motley Fool: To Educate, Amuse, and Enrich
July 19, 2013

Investing in art and jewelry just might be too capital-intensive and/or too speculative for the average retail investor. The practical option here perhaps would be to invest in companies catering to the luxury or high-end markets like Sotheby’s or Tiffany & Co.. The U.S. economic recovery may be not as robust as many would wish, but certainly the recent fundamental strengths it exhibited, such as gains in employment and the rise in disposable incomes, augur well for these equities’ respectively iconic fine arts and jewelry.

Both companies are established brand franchises. Sotheby’s has been pounding its gavel in auction sales in global centers, while also enticing retail consumers internationally for more than two and a half centuries. The same is true for Tiffany, established 1837, whose blue box provides delight through its 115 stores across the globe, and strong online presence.

Robust stand vs. marauding Amazons

While these ladies constitute only a small segment, their preference as consumers provides an indication that the high-end domains of Tiffany and Sotheby’s are unlikely to be successfully invaded by mass market e-tailers like Amazon (NASDAQ:AMZN). After having established a beachhead in wines recently, Amazon is now reportedly hot on the comeback trail in selling fine arts through tie-ups with galleries, a venture it tried but abandoned years back with Sotheby’s.

The element that Amazon obviously lacks is what Luxury Institute CEO Milton Pedraza calls “relationship selling,” which when cultivated enough, can help bolster sales in both size and frequency. A majority of the elite patrons of Tiffany, for instance, appreciate handwritten thank-you notes from the jeweler’s salespersons they deal with.

When emotions rule

Such an emotional experience can be equated with the “theatrical performance,” which one

My take, therefore, is that the forays of Amazon and its ilk in taking e-tailing into high-end market, are unlikely to shake the foundations of Tiffany and Sotheby’s as investment possibilities. Those artsy investors who may even be thinking of having Amazon as an alternative pick with its reported ambitions to rejoin the art circle, are likely to be turned off by the current “nosebleed valuation” of this equity. It trades at a forward one-year P/E around the mid-90s, which seems like betting heavily on the works of a fledgling artist.

Looking more attractive, Tiffany has a forward one-year P/E ratio that barely touches the 20s, The jeweler also had an appreciable 2013 first quarter with its worldwide sales rising 9% and net profit gaining 3%. With faster growth in Asia and lower-price silver jewelry as the main primers, it expects 6-8% sales growth for this year, a pace that Wall Street sees as a return to more robust gains for the company. Notably, Tiffany is adding 14 company-operated stores this year; seven in Asia-Pacific, six in the Americas, and three in Europe.

Although Sotheby’s 2013 first quarter was a bit rougher, its one-year P/E valuation close to 18 appears inviting. For the most recent quarter the auctioneer had a 3% drop in revenues to $101.7 million, despite an increase in auction sales. Its auction commission margins, which trended lower for the quarter, have been strengthened recently to help in revenue improvement.

Conclusion: Ready for the challenge

As a final take, Sotheby’s looks ready to fend off any incursion of e-tailers like Amazon on its turf by adopting the same technological tools wielded against it. Company chairman, president and CEO Bill Ruprecht said Sotheby’s is “continuing to redefine and personalize the company’s client experience.” These initiatives, he said, include the delivery of web-based tools so that company clients across the globe can engage Sotheby’s “anywhere, at any time on any device” and access private sales shows be it in New York, London, Hong Kong, or China and elsewhere.

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