There is a lot of discussion among wealth managers as to whether it is wise to expand their offerings, thereby creating family office practices. Prompting these discussions is the realization that the ultra-wealthy wealthy, with a net worth of $30 million or more, increasingly prefer engaging family offices to wealth management practices. The underlying logic is straightforward. The ultra-wealthy are looking for the same advantages single-family offices provide the super-rich. And a percentage of these advantages extend beyond wealth management.
You likely need to answer a few questions to decide if a family office practice makes sense for you. The first question is…
Who are my preferred clients?
While a family office practice can benefit all manner of clients, the ultra-wealthy are the ones most interested, and you can, with a family office practice, deliver tremendous value because of the complexity of their lives. So, a family office practice might be necessary if you want to work with the ultra-wealthy. It provides a significant competitive advantage over wealth managers.
The next question is…
How do I best structure a family office practice?
There are several ways to structure family office practice, none inherently the best. In the private wealth industry, there is a trend for platforms, corporate RIAs and broker/dealers to develop the infrastructure enabling their advisors to, on an as-needed basis, have the capabilities of a family office.
Andree Mohr, chief implementation officer for Integrated Partners, a leading financial advisory firm, said, “We assembled all the expertise required to duplicate the capabilities of high-performing single-family offices. Some of the expertise is in-house, and much of it is outsourced to carefully vetted professionals and other providers. We then work closely with our advisors so they can deliver superior results to their wealthier clients, which entails not only having the appropriate solutions for their clients but also how to manage best and grow their relationships with the ultra-wealthy.”
Some firms build the expertise themselves. “When we decided to move from a wealth management model to a family office model, we decided to control what we can provide our ultra-wealthy clients,” says Vince Annable, CEO and founder of VFO Advisory Group and co-author of Your High-Performing Virtual Family Office: Maximizing Your Financial and Personal Lives, “For us that meant investing in infrastructure and creating a network of specialists.” Again, there is no best answer to structuring a family office practice, as many variables need to be considered.
Another question you need to ask is…
How do I grow my family office practice?
If you build it, there is little chance the ultra-wealthy will come. You will still need to make a concerted business development effort.
“The most effective way to connect with the ultra-wealthy is through referrals from other professionals,” says Mohr. “We developed our CPA Alliance program to connect our advisors and accountants and deliver exceptional value to the accountants’ clients. The accountants provide the ultra-wealthy clients, and the advisor can use our family office practice infrastructure to ensure these clients get superior results.”
A family office practice is increasingly the optimal business model if you want to work with the ultra-wealthy. Still, you must carefully discern the viability of having a family office practice and what it will take to make it successful.