Advisors looking to move upmarket have the potential to generate strong organic growth by delivering a family office-style experience to a cohort that many consider to be the crème de la crème: ultra-wealthy investors with more than $25 million of net worth (exclusive of a personal residence).
To accomplish that, you first need a clear understanding of this market segment’s preferences and demands. To effectively serve these ultra-wealthy clients, you should discern their needs and adapt your approach accordingly. Do so, and you gain the potential to greatly increase the amount of assets you manage, your revenue growth and your profitability.
The Ultra-Wealthy Gen-X And Millennial Opportunity
It’s long been assumed that the best place to seek ultra-wealthy clients is among the oldest generations—particularly the baby boomers. That makes sense on the surface as, in general, older investors are the wealthiest investors.
However, our latest research reveals that a sizable percentage of younger investors have joined the ranks of the ultra-wealthy. For example:
• 43.0% of the ultra-wealthy we surveyed are millennials, between the ages of 27 and 41 (in 2023).
• Gen Xers (between the ages of 42 and 57 in 2023) make up 23.0% of the ultra-wealthy—not far off from the percentage of ultra-wealthy baby boomers (29%).
• Together, 66% of the ultra-wealthy are age 27 through 57 (see the chart).
66% Of The Ultra-Wealthy Today Are Millennials Or Gen-Xers
The upshot: While it makes sense to include boomers in your efforts to attract ultra-wealthy clients, these two younger generations present particularly attractive opportunities for organic growth.
What The Young Ultra-Wealthy Expect
Our research reveals a few key wealth management issues that are top-of-mind for millennials and Gen-Xers with at least $25 million of net worth.
1. They want to be hands-on. A hallmark of ultra-wealthy investors in general is that they don’t want to completely hand over control to someone else when it comes to managing wealth. Example: 82.1% want to be actively involved in day-to-day investment management.
Among millennials, this desire to be hands-on is especially strong—reported by 94.9% of this age group—while 87.2% of Gen-Xers want daily involvement in their investing.
2. They want their professionals to coordinate their efforts. Investment management is just the tip of the iceberg when it comes to what ultra-wealthy investors want. They typically work with a diverse group of professional advisors that includes accountants, independent investment advisors and full-service brokers. Millennials and Gen-Xers are especially likely to work with private bankers, and they’re less likely than older generations to use no advisor at all.
Given their wealth, such findings aren’t shocking. However, our research also indicates that the ultra-wealthy also want their financial lives to be coordinated: Four out of five (80.3%) believe that it is either extremely or somewhat important for their advisor, accountant, attorney and other financial professionals to communicate with each other about optimizing their financial situation. This desire is greatest at the higher levels of wealth.
3. They want a family office. Perhaps the most striking finding from our research is that the ultra-wealthy essentially told us what they want from their advisors to address these concerns and pursue their goals. Specifically, they seek an integrated, coordinated approach to managing their financial lives via a family office experience. Consider that:
• Seven out of 10 (70.8%) ultra-wealthy investors are somewhat or very interested in getting advice and solutions via a family office.
• Family offices are especially attractive to younger generations: Among millennials, this desire is nearly universal—96.5%—while 88.5% of Gen-Xers are interested in the family office service model.
It’s no wonder that so many of the ultra-wealthy are interested in family offices—which combine exceptional wealth management expertise with specialized attention to administrative and lifestyle matters, as well as the capacity to deal with numerous important one-off scenarios the ultra-affluent may encounter throughout their lives.
By providing extensive, coordinated solutions that address investors’ financial situations and multiple other aspects of their well-being, family offices can build and protect clients’ personal wealth—while making their lives a whole lot easier and more enjoyable.
Creating A Virtual Family Office For The Ultra-Wealthy
The fact that the ultra-wealthy want a hands-on, family-office experience presents a challenge for advisors: The overhead and operational costs you’ll incur by maintaining a family office might not be efficient—or even feasible—unless you’re serving individuals or families with at least $150 million in net worth.
The good news is that you don’t have to create a full-fledged family office to successfully attract and serve many ultra-wealthy millennials and Gen-Xers (and baby boomers, too). Instead, you can deliver the vast majority of a family office’s benefits by creating what is known as a virtual family office.
A VFO provides similar services as a traditional single-family office that works with just one family, but in ways that can allow you to serve multiple high-net-worth families profitably. By leveraging technology and networks of experts, a VFO delivers specialized financial, investment, legal, tax and lifestyle services to clients regardless of their geographic location.
Designed to meet affluent clients' diverse and complex needs, VFOs coordinate a wide range of professionals and resources, offering a more personalized and integrated approach to wealth management than traditional options. They provide elite-level expertise and solutions to a broader range of affluent clients, reflecting a philosophy that aims to enhance clients’ quality of life and align clients’ wealth with their values, goals and dreams.
A Transformational Approach
Ultimately, the VFO model is a transformation in our industry—a new way of thinking about wealth management that aligns with the key needs of the ultra-wealthy.
For financial advisors, it represents a compelling opportunity to set yourself apart and generate strong organic growth by recognizing the ultra-wealthy’s expectations—especially the desire among millennials and Gen-Xers for a highly integrated, personalized and hands-on experience—and building an efficient service model to expertly (and profitably) deliver what we know they most want from you.
If you choose to pursue the ultra-wealthy market, the VFO is your key to unlocking new doors, attracting new clients and setting you on a path to success.
Dive into our exclusive insights and strategies with our latest Play to Win Report here.
George Walper and Catherine McBreen are managing principals at CEG Insights. They leverage their extensive industry experience to drive organic growth and excellence in wealth management.