Many different types of firms are competing to help the ultra-wealthy (those with $10 million or more in assets) with their financial needs. Certainly money managers are. But given the fierce competition, it’s not just investment performance that counts—it’s also the business model.

There are basically three types: investment managers, wealth managers and multifamily officers.

Each has advantages and disadvantages. All should be able to provide investment portfolio management, including asset allocation, rebalancing and a diverse set of potential investments.

But the multifamily office and wealth management models add various wealth planning specialties and life insurance. The wealth management business model includes a range of wealth planning services and life insurance. The multifamily office takes that further and incorporates a broad array of administrative and lifestyle services.

One model is not inherently superior to another for portfolio management expertise, but the ultra-wealthy do have preferences.

The Multifamily Office Advantage

According to a survey of 206 ultra-wealthy investors, about three-quarters prefer to work with multifamily offices (Figure 3). Another 15% gravitate to firms with wealth management models. Less than 10% choose investment advisors. The remaining few choose other types of firms (such as planning firms where money management is secondary).

The near universal appeal of the multifamily office model is its holistic orientation. A well-run multifamily office delivers the best solutions (not services or products). To the point: Nine out of 10 ultra-wealthy investors say they like the fact that the multifamily office is not pitching products.

More than eight out of 10 of those surveyed see multifamily offices as being extremely responsive to their needs as well. Again, a distinguishing characteristic of these offices is that they are exceedingly service-oriented; they not only quickly address issues but they can also anticipate issues and keep solutions at hand.

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