Wealth terminology guide aims to ‘counteract the BS’ for investors

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

A leading advisory group to the wealth management industry has launched a crowdsourced list of wealth terms it hopes will reduce confusion and marketing hype.

The Ultra High Net Worth Institute, a nonprofit focused on improving services to wealthy families and investors, recently unveiled its “Wealthesaurus” — a list of over 80 terms commonly used and abused in the wealth management business. The list, which will be continually updated and expanded based on input from wealthy investors and advisors, aims to define the new language of wealth management and create accepted standards for communicating with clients.

“There are a lot of garbage terms, a lot of marketing terms being tossed around,” said Jim Grubman, content and curriculum chair at the Ultra High Net Worth Institute and the founder of Family Wealth Consulting. “The motivation on a lot of this is to counteract some of the BS in the field.”

The need for a credible wealth Wikipedia follows an explosion of gimmicks, false labels and misleading hype in the business of managing the fortunes of the wealthy.

In 2024, households worth $5 million or more controlled an estimated $49 trillion in financial wealth, more than half of the nation’s total, according to Cerulli Associates. With assets growing fastest at the top of the wealth ladder, the competition for ultra-wealthy investors and family offices has grown fierce among private banks, wirehouses, registered investment advisors, private equity firms and boutiques. With that growth has come a barrage of inflated brand language.

Terms like “family office services,” “holistic advice” and “assets under advisement” are used indiscriminately, making it harder than ever for clients to navigate an industry already impenetrable for nonfinancial experts.

One of the most egregious violations is the term “multifamily office.” Traditionally, a multifamily office is a single family office that’s expanded to serve a small number of outside families or family members. Today, dozens of RIAs, boutique managers and even large advisory firms call themselves multifamily offices, trading off the exclusivity and bespoke services implied by a true family office.

“Some industry observers believe the term has no established basis and should never be used,” according to the Wealthesaurus entry for multifamily office. “Most professionals simply recognize that the term has had growing recognition over the past thirty years, even if there is inadequate validity or consistency in its use.”

To comply with the Wealthesaurus definition, multifamily offices need four specific attributes, from certain clients (at least 10 complex, multigenerational families with a median net worth of at least $30 million) to specific services, service delivery (no conflicts of interest) and experience.

Another contentious term is “assets under advisement.” Firms often toss around asset terms to appear to manage more client money than they actually do. Some firms use “assets under management (AUM),” while others say “assets under advisement (AUA)” and others tout “assets under administration (AUAdmin).” Clients rarely know the difference.

The Wealthesaurus gives highly specific definitions of each, with the focus for assets under advisement being firms that serve as fiduciaries (another debated term). It says clients should ask wealth managers specifically how they break out assets under management and assets under advisement.

“Some firms include AUM in their calculation of AUA without making it clear they are doing so, while others report AUM and AUA separately,” according to the Wealthesaurus. “To address this problem if these amounts are being evaluated, firms should be asked to explain how they calculate their AUA.”

Grubman said the idea for the Wealthesaurus started with an unexpected problem at the Ultra High Net Worth Institute. The Institute was founded in 2019 by Steve Prostano, a longtime advisory to wealthy families and private business owners, who felt that clients needed unbiased help understanding and navigating the industry. The Institute, which counts the leaders of dozens of top wealth management firms, advisory firms and specialists on its boards, also aims to promote best practices and standards in the industry.

Two years ago, the Institute started developing what it calls the Integrated Family Wealth Management Initiative, looking at the sweeping changes in the industry in recent years and how it could better…