What really motivates families to choose or change their financial advisor? For many this is a literal $10MM question.
Wealthy families often reach out to financial advisors due to (A) liquidity event (B) generational wealth transfer timing (C) Poor service and performance by their existing advisor. In order to get ahead of this, independent wealth management firms ought to focus on differentiating factors that elevate the firm’s services.
These are the following areas where wealth managers can generate an advantage:
Creating transparency through accessibility, relevant reporting and “quick reads” on the families financial situation.
Deliver historical tracking insights and analytics regarding the families net worth, and aspects of the families fiscal life that negatively (or positively) impacts net worth; essentially a “Net Worth 360” report/view.
Deliver unique active portfolio insights beyond passive investment or purely active investment - deliver value in terms of wealth risk management and unique wealth creation investments (liquid and institutionalized) that generate net wealth beyond stocks/bonds.
The Concept of Control
As families gain in net wealth, they tend to become more involved and hands on. There is a sense of shared control with the estate and financial advisors need to understand this difference of mentality. To foster the right solution and service - something that will bring HNW/UHNW families with that psychology of “hands on” - wealth management firms need to:
Deliver greater frequency of availability and real time alerts/insights about the families HNW depending on their level of needs and touches.
CRM, financial planning software, portfolio account system and other solutions needs to be integrated and deeply interconnected to drive the value proposition home.
New analytics regarding the clients household and wealth management needs to be created. If a financial advisor has all this information regarding a families historical transactions, historical investment performance
BlackCrown’s Independent Sponsor and Secondary Market
BlackCrown educates wealth management firms by introducing the concept of independent sponsor buyouts for family offices. For UHNW firms where the patriarch has established wealth, often through an exit of a privately owned business, the needs and ambitions do not end with the first sale.
Wealth management firms have an obligation and open opportunity to introduce capital creation ideas whereby the patriarchs can grow wealth by acquiring unique businesses within their line of specialty.
Say for example, the patriarch of the family was the former CEO of a large paper mill business which sold for $30MM. The family has substantial net wealth and the patriarch, “Steve”, is restless. One day, Steve finds a unique opportunity to acquire a niche competitor for $60MM because that owner, “Paul”, is retiring. Being younger, Steve senses an opportunity to build wealth again. However, how does Steve put together the deal to buyout the firm, especially if bankers are circling Paul?
BlackCrown has put together and been apart of numerous institutionalized process as an independent sponsor. In these “Steve and Paul” situations, our firm puts together the networks and debt capital to help Steve acquire the $60MM business with minimum equity involvement, thus preserving 1st generation wealth while creating the 2nd.