In many ways, the accounting industry is under pressure from factors such as fee compression and seriously increasing competition. The current crisis is exacerbating the problems some accounting firms are having.
At the same time, there are certain types of clients and sets of services that are proving to be extremely profitable for accounting firms. One such type of client is the ultra-wealthy. Furthermore, a potentially highly profitable segment of the ultra-wealthy is those with single-family offices.
There are several sometimes overlapping reasons single-family offices can be exceptional clients for accounting firms including:
- Single-family offices are booming creating greater demand for the expertise accounting firms can provide. While some accounting functions are internal to many single-family offices, many are not. With the increase in the number of single-family offices, there is an expanding cohort in need of many of the often diverse services of accounting firms.
- By working with single-family offices, accounting firms create a halo effect that can be leveraged to bring in additional ultra-wealthy families as clients. What is very telling is that the ultra-wealthy families that become clients because the accounting firm is recognized as a thought leader working with single-family offices turn out to be, in the aggregate, more profitable for these firms than the very profitable single-family offices.
- As single-family offices are becoming more high-functioning, senior management and the ultra-wealthy family is increasingly inclined to strategically outsource. More and more, single-family offices tend to focus on a small set of deliverables and turn to external experts for other services and products. In effect, a meaningful number of them are disaggregating providing tremendous opportunities for accounting firms to acquire tax planning, compliance, and a wide range of consulting work.
- In serving single-family offices, when the accounting firm’s expertise is properly positioned, the fees charged by accounting firms are not a problem. By focusing on value as opposed to cost and highlighting differentiated as opposed to commoditized offerings, accounting firms can be well compensated for their services. Along the same lines, with this orientation around value, realization with single-family offices is rarely problematic.
- Single-family offices tend to have a multitude of needs and wants. Because of the array of services single-family offices outsource today, accounting firms can likely provide a wide range of expertise.
- International single-family offices are increasingly relying on local accounting firms for various services. For example, many times they are looking for accounting firms to provide services and support to family members traveling to other countries as well as on-the-ground oversight of investments in those countries.
In sum, the ultra-wealthy in general and single-family offices, in particular, are regularly extremely lucrative clients for talented, capable, and forward-thinking accountants. Single-family offices tend to have wide-ranging needs and wants and will pay well for high-quality solutions and very fast responsiveness.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.