September 2, 2014
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Hannah Shaw Grove, Rus Alan Prince and Richard J. Flynn
Building and cultivating a wealthy customer base is an important initiative for many types of professionals, especially those that specialize in addressing the unique needs of the affluent.
Whether you’re a provider of luxury goods, a hedge fund manager or an international tax specialist, you’ve no doubt felt the competition from other specialists and experts. In a recent survey with advisory practitioners, we learned that the pressure is particularly acute for the majority of these professionals. Out of 466 advisors surveyed, 90.1% said that it’s more difficult to find high quality clients and 67.4% cited more intense competition as contributing to a worsening business climate.
Anecdotal evidence indicates that these dynamics become more pronounced the higher you move up the wealth ladder, meaning that the more exclusive and focused your practice is around the ultra-affluent, the harder it will likely be to sustain and grow your business.
The difficulties associated with servicing the high-net-worth markets are well known and well documented, but the rewards are sufficiently attractive to keep attention focused tightly on the wealthiest individuals and families. As a result, advisors continue to have a strong interest in adopting business models that will enable long-term, profitable relationships with a wealthy clientele.
One powerful solution is to become a multifamily office. Not surprisingly, our research shows that a larger percentage of advisors are already describing themselves as MFOs and even greater numbers want to learn more about the model to determine whether it’s appropriate for them and their clients.
Comparing separate surveys in 2009 and 2014 (the numbers of advisors surveyed were 226 and 466, respectively), the percentage of advisors operating as multifamily office providers grew from 4.9% to nearly 19.1% while the interest in becoming an MFO increased from 15.9% to 33.5%.
Despite the growth in adoption and interest, 47.4% of advisors said they are not interested in the MFO model in 2014, down from 79.2%.
It’s helpful to understand the logic behind these perspectives in order to weigh your own decision in the context of the current business environment.
"Whether it’s the Whole Client Model or another similar system, comprehensive holistic profiling is an essential factor in the ongoing success of a multifamily office." I'm currently using Wealthucate (about.wealthucate.com) for holistic profiling. What are you guys using?