Lintz kicked off her money camp three years ago. She hired a retired math teacher to design the curriculum for the pint-size millionaires-sons and daughters of beer-brewing executives, Internet entrepreneurs and the athletes. Much of this care and feeding comes out of the 30 to 70 basis points against assets that the firm charges the 140 families who utilize its services. FMP sometimes charges extra for extraordinary services. Lintz's profit margins are 20%, well below the 40% she says traditional asset managers aim to earn.
"Multifamily offices have been trying to figure out a profitable business model for a couple of decades," says John Davis, chair of the Families in Business program at Harvard Business School, who studies the firms. "They are seeing the limits of providing a lot of services."
Clients can be demanding. One whose assets are overseen by Signature schedules weekly meetings with its staff, Signature founder Susan Colpitts says. The firm manages the client's money, buys and sells his real estate and helps hire household staff.
"We don't walk the dogs, but we do pay the bills and help people with private aviation," Colpitts says.
"The business of tax preparation and bill paying is a lousy business," says G. Moffett Cochran, co-founder of Silvercrest Asset Management Group LLC, which ranked 18th, with $10.2 billion under advisement. "You can't lever it up. We do it, but we insist we get paid for it properly."
Low margins and all, the business is attracting savvy buyers. In July, Affiliated Managers Group Inc. purchased a stake in Veritable L.P., a family office firm in Newtown Square, Pa., that oversees $10.3 billion for 193 hyper-rich families. (It's No. 17 in the ranking.) AMG won't say how much of Veritable it bought or how much it paid.
AMG normally buys mutual funds and hedge funds, which charge higher fees because they manage money directly. Family offices often farm out clients' money to professional managers. AMG's stakes in 27 managers generated $553.4 million for the firm in 2011.
"I really don't care what the margin is," AMG CEO Sean Healey says. "A lower-margin business that is stable is perfectly fine."
Boutiques such as Signature and FMP are eating into a business that the banks rely on. Their middle-class clients are getting poorer. Median household net worth in the U.S. declined to $77,300 in 2010, the lowest since 1992, according to a June study by the U.S. Federal Reserve. New laws designed to prevent a replay of the 2008 credit crisis have made trading less lucrative too.
That makes banking for the wealthiest more attractive than ever. To take in more family cash, many big institutions are trying to look smaller-and more blue-blooded. In April, Wells Fargo & Co. set up a unit called Abbot Downing to court family clans with $50 million or more. The name-which sounds suspiciously posh-is real. Abbot-Downing Co. designed the Concord Coach, the 19th century stagecoach that's part of the Wells Fargo logo. Mark Twain called it a "cradle on wheels" because of the rocking ride.
U.S. Bancorp last year rebranded its wealth-management unit, calling it Ascent Private Capital Management. Ascent has opened sleek offices in Minneapolis and Denver that look like Apple Inc. stores, all glass and white walls, where wealthy clients can take classes, hold meetings and even throw dinner parties for as many as 50 people, with china provided.
Michael Cole, president of Ascent, says the unit will earn pretax margins of more than 30% because it plans to charge for many of its noninvestment services and also lend money to clients and take deposits-services independent family offices can't perform.