Since so many families have become attracted to multifamily offices, many firms are using that description for themselves. Yet they aren’t really duplicating the advantages of a single-family office, and the wealthy families have caught on to this bait-and-switch marketing ploy. That means financial professionals with “real” multifamily offices are the ones that will prove most successful.
Prepare to negotiate: As more private wealth is created, and as wealthy people share their information and insights with one another, they’re going to become smarter consumers of financial services and products. They will be much more critical of what they are told by financial professionals, especially when it comes to the subject of fees.
The same perspectives and methodologies being used by single-family office senior executives are being adopted by less wealthy families too. Financial professionals are going to be dealing with wealthy prospects and clients intent on negotiating fees, and the professionals had better be prepared for those talks. The discussions should center on the value that the wealthy families are getting, such as whether the executives are good at talking down fees with product and service vendors.
The changes in the private wealth industry have accelerated to some degree because of the recent crisis, and these trends will only intensify. For those financial professionals who aim to work with the wealthy, these changes ought to offer some strategic direction and let them better plan how to best serve wealthy families as well as build highly successful practices.
That means they should be able to help clients legally blunt their tax impact and be able to deliver holistic solutions along the lines of a single-family office. And remember, it also means being attuned to more discerning wealthy families who are going to want to negotiate fees and operating arrangements.
An understanding of these trends is essential for advisors who want to succeed.
Russ Alan Prince is president of R.A. Prince & Associates. Brett Van Bortel is director of consulting services for Invesco Consulting.