Ultra-wealthy families establish single-family offices for several reasons. Topping the list is greater control over their financial and personal lives. Because of the level of control and the ability to source top-of-the-line talents internally and externally, single-family offices can deliver exceptional value to ultra-wealthy families.
While many single-family offices are high performing, meaning they can deliver exceptional value, some fall short. This is the case even when they engage the most talented and brilliant professionals. Ironically, it can be because they engaged the most talented and brilliant professionals, focusing on being technically brilliant.
In studying all types of family offices and leading professionals such as wealth managers, accountants, attorneys, private bankers and so forth, we have found they stress their technical capabilities. That does not mean many single-family office senior executives or professionals are not adept at establishing and enhancing business relationships. However, doing so is given much less emphasis than being proficient with the mechanics of the services and products family offices provide.
Let us assume that the experts working for single-family offices are exceptionally technically capable. The complication is that most of the very best experts are fungible, a situation likely to accelerate in the near future.
Technical Expertise Is Increasingly Commoditized
Reality check: there are no exclusive legal, financial, administrative or lifestyle solutions. There is nothing available that is inherently unique. For example, an exceptional wealth planner can conceivably use all the same tools and techniques as another exceptional wealth planner. Investment management is also becoming increasingly a commodity, even in the high end. This applies to administrative and lifestyle services as well.
At the top of each profession, the experts are outstandingly good at their work. Among these cohorts, the ability to interchange the professionals and get exceptional results is very good. Remember that we are talking about the very top of the professions. Those professionals who have reached this level of proficiency are much better than their peers who are not at this level. However, this will soon change.
By 2030, generative artificial intelligence will dramatically transform the private wealth industry. Most of the expertise currently provided by professionals, even for the ultra-wealthy, will be replaced by generative artificial intelligence. However, this will not eliminate the need for professionals to work closely with ultra-wealthy family members.
Today, all the talent working for an ultra-wealthy family does not necessarily produce a high-performing single-family office. Even when generative artificial intelligence is intimately part of the picture, it will not guarantee a high-performing single-family office. Intense attention to family members' goals and concerns is critical, and a deep understanding of their objectives and limitations is essential.
Family First
One of the biggest obstacles to establishing and maintaining a high-performing single-family office is focusing on the technical instead of the personal. A high-performing single-family office is all about the family, thus the term family first.
Look at most conferences for single-family offices. A content analysis of 28 events designed for single-family offices shows that, on average, 91% of the material is how-to (See Exhibit). Examples include:
• Investing in an economic downturn.
• How private placement life insurance can boost returns.
• The role of private credit in an investment portfolio.
• What’s the correct percentage of alternatives?
• How to select a nanny.
• Private foundation or donor-advised fund.
• The skills of reputation management.
• How to sell your company.
• Cybersecurity strategies.
All in all, the agenda for these conferences is replete with presentations and discussions of technical issues from investment strategies to immigration law to international tax mitigation strategies to cyber-security.
Many single-family office events fail to address what matters most: being attuned to the family. What differentiates the high-performing single-family offices from their peers is the degree to which the focus is on what rather than how.
When talented single-family office professionals genuinely understand what the ultra-wealthy family wants to accomplish, they have the what and the how. Many professionals do not understand the ultra-family’s objectives because they are too wrapped up in the how. Without intense attention to the goals and concerns of the ultra-wealthy family, all their technical wizardry will not produce a high-performing single-family office. It is always a matter of family first.
Implications For Wealth Managers
The family first philosophy and orientation are also essential for wealth managers. This perspective is core to their ability to deliver superior results where their wealth management solutions are cost-effective and perfectly aligned with their clients’ objectives. Additionally, no significant opportunities are missed.
Again, technical expertise is very important. However, today, wealth managers can provide the highest levels of technical expertise by finding the appropriate specialists if they lack in-house capabilities. Moreover, due to generative artificial intelligence, such expertise will be widely available by the turn of the decade.
Even when generative artificial intelligence permeates the private wealth industry, there will be a need for professionals who can develop a deep understanding of clients' agendas and anxieties and help them make smart decisions. These professionals will be highly adept at processes like Everyone Wins and collaborative thinking.
Jerry D. Prince is the director of Integrated Academy, part of Integrated Partners, a leading financial advisor firm. Russ Alan Prince is a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.