The Mindset Of A Successful Multi-Family Office

From the outside looking in, many advisors see the multi-family office model as one they wish they had. To have just a few clients with huge profit margins is the dream. However, it is not easy to be successful in this space.
 
Russ Alan Prince of R.A. Prince & Associates, Inc, in conjunction with Financial Advisor and Private Wealth magazines, hosted the second annual Creating an Exceptional Family Office Experience conference in Boston, Mass.
 
A Look Under The Hood
Prince tells it how it is. Related to the old saying, "Do what you love and the money will follow," Prince blurted, “It is nonsense.”
 
His research of wealthy people and both family offices and multi-family offices finds that it is all about maximizing a model that solidifes the relationships. “The objective is going upscale,” said Prince.
 
Richard Flynn, a principal in Rothstein Kass, spoke about knowing the clients extremely well at the multi-family office level. Know who they are? What are their needs? What keeps them up at night?
 
He made it clear that at this level you have to be exceedingly good at what you do. “You have got to have a suite of services, and have got to differentiate it and you have to be pretty good at it,” advised Flynn.
 
His organization is based on three Cs:
1. Confidential – these clients are like submerged whales.  They care about confidentially.  “If you were in, you were sworn to secrecy,” said Flynn.
2. Competent – You can’t just say you are an expert. “You will have to be endorsed.  You need to prove it to get that meeting,” added Flynn.
3. Caring – Clients need to know that you care about them.
 
Identifying A Focus
To be successful finding the ultra wealthy, Flynn spoke at hedge fund conferences.
 
His firm also targeted athletes and entertainers, as he found the advisors for these types of clients tend to be mediocre or thieves.  The problem with these clients is that they make a pretty good income, but they do not tend to have a large net worth.  There are also major issues with much of the money going to Uncle Sam, and their entourage and divorced wives or husbands.
 
“Occasionally we worked with entrepreneurs that had a liquidity event,” shared Flynn.
 
Macro Management
As his business evolved, he recognized his clients wanted a quarterback that did balance sheet management across the board. Following the market downturn in 2008, most family money was on the sidelines.
 
Many were no longer focusing on returns, but preservation instead. Clients needed to manage their lifestyles and grew leery of some folks touting money management in the wake of Madoff.
 
Flynn said, “They want a separation of church and state.”
 
That is why his organization does not do money management.  Instead they do book keeping, bill pay, accounting, financial statements, insurance (not as provider, but as a consultant).  “We might help them find [investment managers and hedge funds], but we are not offering that as a fee for service,” shared Flynn.  “We are a macro manager of all their micro managers.”
 
Through working together as a team, Flynn’s model allows his organization to work nicely in the sandbox with many different investment managers.  They focus their time getting to know the client. He recommends that approach with meeting with a prospective client.  No PowerPoints are needed.  Instead, listen and possibly give them leave-behind material.
 
Prince talked an array array of services that need be to be addressed
·      Investment management
·      Advanced planning
·      Private investing / banking
·      Administrative services
·      Life-style services
 
One option is structuring a boutique model with multiple boutiques. Prince gave an example of a client meeting set up to talk about investments can turn to a topic about adopting a child from another country. In many cases, an outsourcing model is needed, but if a multi-family office uses the same providers that others do, they are not differentiated.
 
To be successful meeting the needs of these ultra-wealthy clients, an organization has to have access to high-quality providers. The job of execution is unlikely that of the multi-family office, but both presenters made it clear that the multi-family office has to be involved and the external relationships have to be managed.
 
Flynn also noted that younger clients want a virtual multi-family office, stressing the need in the industry to adapt to technology advancements.
 
Flynn mentioned the importance of liquidity management and estate planning.  He pointed out a four-pillar approach around:
1.     Doing accounting and taxes
2.     Being a chief investment officer
3.     Filling the trust administration role
4.     Providing reporting and technology
 
Flynn said that advisors need to manage and run meetings and set the agendas.  If you don’t stay involved, problems will happen.
 
Mike Byrnes is a national speaker and owner of Byrnes Consulting LLC. His firm provides consulting services to help advisors become even more successful. Need help with business planning, marketing strategy, business development, client service and management effectiveness? Read more at ByrnesConsulting.com and follow @ByrnesConsulting.