Primary Market Segments for Investment Firms

"Now you can focus on the big ticket retail."
--Lynch (Wall Street)

There are two general customer segments for investment firms. One is institutional. The institutional segment is highly driven by short term performance. Firms that manage money for institutional clients gear interaction to quarterly performance report. This may be written only with little personal interaction. The firm may utilize the same 'model' portfolio across institutional clients.

The other segment is high net worth (HNW) individuals. These clients may not have investment performance goals, at least not in the near term. They are often more concerned about 'lifestyle' objectives, such as funding college educations or estate development. Due to the variety of client goals and risk preferences in this bracket, portfolios vary widely and are managed on an individual basis. Model portfolios, if developed, serve primarily as a reference or starting point for investment decisions.

Institutional accounts offer potential for scale economies and, being larger than HNW accounts, can be more lucrative in terms of management fees. But institutional accounts are 'high maintenance' in that they require more handholding with institutional clients. Because institutional clients typically possess a shorter time horizon, they are also more fickle to near poor near term performance. HNW accounts require more work but tend to be much stickier.

Investment firms might specialize in institutional or HNW business, or they might blend their book of business.