I’m regularly asked about the size of the private wealth market, especially the number of people or families with hundreds of millions of dollars. Along the same lines, I’m asked about the number of single-family offices. Clearly, advisors are looking to determine the number of prospective clients available to them or at least get a feel for the overall opportunity. The answer is that no one has been able to accurately size the market, but if you’re an advisor or even a senior manager in a larger financial institution, it really doesn’t matter.
There are a number of consulting organizations and media organizations that calculate the size of the private wealth market. Consulting firms such as the Boston Consulting Group and Capgemini often produce reports on the industry, including calculations on the number of wealthy individuals. Wealth-X is another firm that produces such information.
These firms and other ones employ well-reasoned—albeit different—methodologies to produce their numbers. But there are issues with the underlying assumptions in these methodologies. The result is highly erudite estimates that, in the final analysis, are just that—only estimates.
Consider the billionaire population. Depending on whose numbers you’re looking at, there are somewhere between 1,700 and 2,100 billionaires in the world. None of these estimates likely included Sergei Roldugin. Who is Sergei Roldugin? In 2014, he informed The New York Times that he did not have millions of dollars. Then the Panama Papers came along and revealed that Sergei (or at least his name) is connected to $2 billion in an interlaced network of offshore companies. The Panama Papers leak has named names that are not counted by firms that track the super-rich.
In all likelihood, there are more rich people—especially super-rich people—than are cited by the consulting firms or media organizations. Many rich people hire lawyers and accountants to obfuscate and even hide their wealth, making the process of counting them increasingly difficult.
As for single-family offices, industry pundits provide estimates ranging from 2,000 to 15,000. I’m very confident there are more than 2,000 single-family offices because that’s how many I have in my database and I’m absolutely certain my database is incomplete. Moreover, if you use a liberal definition of a single-family office, you’ll probably end up with more than 15,000 of them.
For advisors, these estimates—even if they were precise—are pretty much worthless. For a wealth management practice, what difference does it make if there are 1,700 billionaires or 1,900 or 2,100? If there were 5,000 or 10,000 single-family offices, what difference would it make to an advisor?
Let’s look at “numbers” another way. For your services and products, how many super-rich clients or single-family offices do you have to be working with to do astoundingly well? Ten? Five? Three? One? In all likelihood, a handful of these amazingly wealthy clients would translate into a hyper-successful advisor practice.
The world population of super-rich or single-family offices is not really important to an advisor. What is important is finding a small number of them and making them your clients.