Individuals and families with a net worth of $30 million or more are defined as ultra-wealthy. They regularly have several, if not many, professionals advising them. Most of the ultra-wealthy have taken action regarding areas such as investment management and wealth planning. What is so telling is that a majority of these individuals and families are (1) relying on the recommendations of these professionals and (2) recognizing or are uncertain if they are getting superior results. Consequently, they are getting second opinions to be confident that their actions are the most appropriate and that they are not missing anything.
Getting second opinions is common in some professions, such as medicine, but has been rare in the private wealth industry. This is changing and is being driven by the extremely wealthy and their single-family offices. The change is also being driven by professionals who are proactive and responsive to the needs of their ultra-wealthy clients.
According to Joshua Bodenstadt, tax partner at Duffy Kruspodin (DK), “Many of our most successful clients are asking us to look over what they’ve done to see if any refinements can be made and if there are any gaps that need to be filled. At the same time, we are approaching our clients to see how we might help them get better results. We consistently find that a significant percentage of our clients can do much better, and, working with a team of experts, we regularly find ways to improve their financial situations dramatically.”
It is essential to recognize that the private wealth industry is strongly tilted toward the professionals instead of the clients. Much of this is structural. Many professionals are disincentivized to make necessary adjustments as they proclaim themselves as fiduciaries or emphasize client-centeredness.
According to Homer Smith, director of the DK Family Office Practice and co-author of Making Smart Decisions: How Ultra-Wealth Families Get Superior Wealth Planning Results, “Many professionals view the world myopically through the lens of their expertise. This can be bad for clients since they never seem to be presented with all viable solutions. For example, working with wealthy families, we review how they can pay estate taxes. There are often six different primary alternatives that could all be mixed and matched. By educating the family about the advantages and disadvantages of all the variations, they make smart decisions. This approach is the best way for them to get the precise results they want cost-effectively.”
“We feel it’s our responsibility to provide the highest quality solutions to our clients, and that includes helping them evaluate where they are and what they might do to get better outcomes,” says Bodenstadt, “Providing second opinions to our clients about wealth management is empowering them.”
The inherent advantage professionals have in the private wealth industry will not shift to clients for a long time. As noted, the reason for the professionals’ advantages is structural. However, by getting second opinions, the ultra-wealthy are slowly forcing a reset in the private wealth industry, which is why this trend is intensifying.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.
