New guide to wealth terminology aims to 'counteract some of the BS' for investors

A mentation of this nonfiction archetypal appeared successful CNBC's Inside Wealth newsletter with Robert Frank, a play usher to the high-net-worth capitalist and consumer. Sign up to person aboriginal editions, consecutive to your inbox.

A starring advisory radical to the wealthiness absorption manufacture has launched a crowdsourced database of wealthiness presumption it hopes volition trim disorder and selling hype.

The Ultra High Net Worth Institute, a nonprofit focused connected improving services to affluent families and investors, precocious unveiled its "Wealthesaurus" — a database of implicit 80 presumption commonly utilized and abused successful the wealthiness absorption business. The list, which volition beryllium continually updated and expanded based connected input from affluent investors and advisors, aims to specify the caller connection of wealthiness absorption and make accepted standards for communicating with clients.

"There are a batch of garbage terms, a batch of selling presumption being tossed around," said Jim Grubman, contented and program seat astatine the Ultra High Net Worth Institute and the laminitis of Family Wealth Consulting. "The information connected a batch of this is to counteract immoderate of the BS successful the field."

The request for a credible wealthiness Wikipedia follows an detonation of gimmicks, mendacious labels and misleading hype successful the concern of managing the fortunes of the wealthy.

In 2024, households worthy $5 cardinal oregon much controlled an estimated $49 trillion successful fiscal wealth, much than fractional of the nation's total, according to Cerulli Associates. With assets increasing fastest astatine the apical of the wealthiness ladder, the contention for ultra-wealthy investors and household offices has grown fierce among backstage banks, wirehouses, registered concern advisors, backstage equity firms and boutiques. With that maturation has travel a barrage of inflated marque language.

Terms similar "family bureau services," "holistic advice" and "assets nether advisement" are utilized indiscriminately, making it harder than ever for clients to navigate an manufacture already impenetrable for nonfinancial experts.

One of the astir egregious violations is the word "multifamily office." Traditionally, a multifamily bureau is simply a azygous household bureau that's expanded to service a tiny fig of extracurricular families oregon household members. Today, dozens of RIAs, boutique managers and adjacent ample advisory firms telephone themselves multifamily offices, trading disconnected the exclusivity and bespoke services implied by a existent household office.

"Some manufacture observers judge the word has nary established ground and should ne'er beryllium used," according to the Wealthesaurus introduction for multifamily office. "Most professionals simply admit that the word has had increasing designation implicit the past 30 years, adjacent if determination is inadequate validity oregon consistency successful its use."

To comply with the Wealthesaurus definition, multifamily offices request 4 circumstantial attributes, from definite clients (at slightest 10 complex, multigenerational families with a median nett worthy of astatine slightest $30 million) to circumstantial services, work transportation (no conflicts of interest) and experience.

Another contentious word is "assets nether advisement." Firms often flip astir plus presumption to look to negociate much lawsuit wealth than they really do. Some firms usage "assets nether absorption (AUM)," portion others accidental "assets nether advisement (AUA)" and others tout "assets nether medication (AUAdmin)." Clients seldom cognize the difference.

The Wealthesaurus gives highly circumstantial definitions of each, with the absorption for assets nether advisement being firms that service arsenic fiduciaries (another debated term). It says clients should inquire wealthiness managers specifically however they interruption retired assets nether absorption and assets nether advisement.

"Some firms see AUM successful their calculation of AUA without making it wide they are doing so, portion others study AUM and AUA separately," according to the Wealthesaurus. "To code this occupation if these amounts are being evaluated, firms should beryllium asked to explicate however they cipher their AUA."

Grubman said the thought for the Wealthesaurus started with an unexpected occupation astatine the Ultra High Net Worth Institute. The Institute was founded successful 2019 by Steve Prostano, a longtime advisory to affluent families and backstage concern owners, who felt that clients needed unbiased assistance knowing and navigating the industry. The Institute, which counts the leaders of dozens of apical wealthiness absorption firms, advisory firms and specialists connected its boards, besides aims to beforehand champion practices and standards successful the industry.

Two years ago, the Institute started processing what it calls the Integrated Family Wealth Management Initiative, looking astatine the sweeping changes successful the manufacture successful caller years and however it could amended service clients. The group's discussions deed a problem: They often couldn't hold connected definite words.

"We would usage a word and idiosyncratic would accidental 'Um, really I deliberation it's this,'" Grubman said. "And idiosyncratic other would accidental 'I retrieve from 15 years agone it was defined similar that.' It was astonishing the differences radical had, adjacent astir words similar household enterprise."

Grubman and Tara Kehoe, the Institute's room manager, started compiling an interior glossary and crowdsourced definitions with members of the group. Over time, the database grew and they decided to make a nationalist mentation to amended assistance clients and firms.

They considered calling it Wealthipedia, but the sanction was taken truthful they arrived astatine Wealthesaurus and added a dinosaur mascot. Grubman said the Institute welcomes suggested presumption and definitions from different wealthiness absorption experts and clients successful hopes of expanding its use. Kehoe said engagement has been precocious — with caller users spending an mean of implicit 7 minutes connected the precocious launched site.

"They're clicking from word to word and truly utilizing the resource," Kehoe said.

The tract doesn't aspire to beryllium a broad usher to each wealthiness absorption terms. There are nary explainers connected GRATS, oregon FLiPs oregon SCINS from the property readying world, oregon SMAs and PPVAs successful investing, oregon the myriad different products that marque affluent investors' heads spin. Grubman said the Institute didn't privation to see products oregon presumption that investors could easy look up connected the web. For those kinds of merchandise terms, the Wealthesaurus website includes links to a assortment of online investing guides, including the Charles Schwab Investing Glossary and Investopedia and the SEC Glossary.

"We looked for presumption that were important to the field, oregon wherever the different definitions retired determination were truthful afloat of jargon," Grubman said. "Wading done the explanation of assets nether advisement connected the SEC website is simply a nightmare, for instance. So we wanted to make this for clients."

As the concern of advising affluent families progressively cuts crossed industries — from spot and property planners to accountants, existent property advisors, philanthropy consultants, aviation and fleet experts, and adjacent concierge doctors and different specialists — the Wealthesaurus tin besides beryllium a span betwixt disciplines.

The Wealthesaurus adjacent has a defined word for "ultra precocious nett worth," a operation utilized passim the luxury and banking worlds with small context.

The Wealthesaurus says the astir communal explanation of "high nett worth" is simply a lawsuit with betwixt $5 cardinal and $30 million. "Ultra precocious nett worth" typically means $30 cardinal oregon more. It cautioned, however, that "with ostentation and the important enlargement of planetary wealthiness since 2000, much firms are considering the modern threshold to the apical UHNW level to beryllium $100 million."