PW: With such a wide scope of services, you probably often have to make the choice of doing it yourself or going to a third party. How do you make that type of decision?
ROGERS: Those are all classic challenges that all these organizations face.
It's really defining what types of capabilities you want to offer to the markets that you're trying to serve. So if you think that outsourcing your hedge fund research to a fund-of-funds provider will support the types of clients that you want to approach, that's a viable solution and you can go through the cost-benefit tradeoff of internal versus external.
SINSHEIMER: First, you have to understand what your core competency is and you have to build on that. There are certain services that might be outside of that, but you have a fair amount of critical mass of demand among your clientele, in which case you start to think, "Maybe I should build it."
But in some circumstances the message it would send to your clientele might be the wrong one. Because you don't want to get known as the group that does X-bill paying, whatever it might be. There's nothing wrong with that. But in our case, we would much prefer to be the conduit to find the best [outside consultant] whereas there are certain other capabilities that we'd like to build internally once we think we have the critical mass and demand.
SALLENAVE: This is an opportunity that we hear from a lot of MFOs, that this is the time to really figure out what they want to be.
There's, I think, a pretty wide belief that there's a lot of opportunity for growth in the near term and in the coming years. And it's about identifying what you want that reputation to be and what you want to be known for, and identifying what's of value to your client base and the type of clients you want to bring into your firm.
SINSHEIMER: Especially when there's value to it, and the family understands there's value to it, but they wouldn't, in a discrete way, pay for it. For example, in the case of financial education for the second, third, fourth generation or more, somebody who can facilitate a dialogue in terms of the dynamics of wealth. Well, probably everyone around this table does that at least informally. But to do it in a formal manner ... may be something where a third party should best be brought in.
SALLENAVE: I think you're illustrating a theme that we see with the family offices that we work with at Schwab, which is there's no question about whether or not there's opportunity for growth. The question is how to grow in a profitable way.
A common theme that we talk about so much with our advisors is what services does the advisor want to retain control of? And which are services that we need to find the most cost-effective way to deliver? And what's the right way to be pricing it? What's the right technology to be using, etcetera?
It's all of those pieces together that will answer that question that many advisors are struggling with, which is, "How am I going to grow profitably? What strategic decisions am I going to make that are going to allow for that?" There are so many different paths to growing profitably, and the question is, again, the identity of the firm that our advisors want to have two, three, five, 50 years from now.
PW: To what extent is the economic environment influencing those decisions?
SALLENAVE: What we're finding as we're talking with advisors is it has less to do with the economic situation right now because I think multifamily offices have really been very focused in the last two years on helping their clients. And so, their clients see a lot of value in what the advisors do.
We recently surveyed our advisors for one of our annual studies and found that there's no significant change in client attrition rates-even through this incredibly tumultuous period. And I think it's a testament to the model that multifamily offices have, which is a very strong connection to their client base.