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Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
 

Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.

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    Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Presentation Transcript

    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Building Bridges Landscape, Comparisons & Implications
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
      • Competitive Landscape: Families & Firms
      • Fee Charging Alternatives
      • Outsourcing/Collaboration: Family Office Services
      Three Take-a-Ways for Your Business
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Executive Summary: Market Heft, Resilient MFOs, Hesitant SFOs
      • Family Office Market Has Heft in the North American Landscape
      • Estimated 140 Multifamily Offices (MFOs) with Aggregate $375 billion AUAs
      • Approximately 2,500 Single-Family Offices (SFOs) with Aggregate $1.5 trillion AUAs
      • MFOs Average AUAs at $3.5 billion; SFOs only $450 million
      • Total Pie of 50k Households > $30 million Estimated at $12 trillion; MFOs & SFOs: 15% Mkt.
      • MFOs Resilient in Face of Turmoil, Enjoy Scale & Recognition
      • AUAs Down Only 9.2% (S&P down 37% in 2008)), Client Relationships Up 8%,
      • with Employee Headcount Up 9%, while Client Attrition Rates are Low at 2.6%
      • Average Client Relationship is $51.5 Million
      • Scale Advantage, Deeper Talent Pool, & Gaining Marketplace Recognition
      • SFOs Hesitant, Not Trusting Alternatives, Have Panache of Being Private
      • Cite Challenge of Keeping Next Generation Onboard, Family Governance Issues
      • Not as Willing to Outsource, Not Trusting Alternatives Available
      • Panache Still There, Intimacy & Privacy, Multi-Gen. Skills Advantage
    • The Landscape is Changing Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Client Net Worth Complexity Enhanced Financial Planner Multi- Family Office External Chief Investment Office External Family Office Enh. FP MFO SFO Ext. FO Single Family Office Private Trust Company PTC CFO Closed Family Office Virtual Family Office VFO JVO Joint Venture Family Office Ext. CIO Degree of Delegation Trust
    • What the Wealthy Want Is Not Changing
      • Objective Advice
      • Stability of Relationship Management
      • Stability of Ownership
      • Open Architecture for Implementation
      • Competency and Consistency of Delivery
      • Breadth of Service Offerings
      Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Ten Family Office Services 1. Portfolio Management 2. Record Keeping & Reporting 3. Estate & Wealth Transfer 4. Comprehensive Financial Planning 5. Tax & Compliance Work 6. Risk Management 7. Trust Company Services 8. Life Management 9. Family Meetings & Education 10. Strategic Philanthropy & Adm. Services Most Offered Services Least Offered Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
      • 79 Firms Participating » Down from 83 Last Year
      • Median of 38 Client Relationships » Up 8.6%
      • $286.3 Billion under Advisement » Down 9.2%
      • $51.5 Million Mean Relationship Size
      • Employee Headcount Up 8.6%
      • Minimum Annual Fee (Mean) » $78,000, Up 11.4%
      • Attrition Rates » 2.6% Clients » 1.7% Assets
      2009 MFO Study at a Glance Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Highlights of MFO Research
      • Storm Damage Appears Relatively Minor
      • Firms Facing a New Competitive Landscape
      • Surge in Hiring of Relationship Managers
      • MFO Executives Remain Highly Optimistic
      • Evidence of Fee Compression
      • Margins also Compressed, Perhaps Temporarily
      • Merger Activity Is Picking Up Again
      • Building Bridges with Single-Family Offices
    • A Shift from Asset-Based Fees to an Annual Retainer Asset Based Fees Percent of Net Worth Annual Retainer Hourly Rate Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • 2008 %∆ 2007 Revenue per $ Assets (bps) 60 -3.2 62 Expense per $ Assets (bps) 57 35.7 42 Profit Margin (%) 13.1% -42.3 22.7% Operating Ratios for MFOs Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Your Top 3 Competitors, Today and 3 Years Ago Rank Today Rank 3 Years Ago Goldman Sachs 1 1 Bessemer Trust 2 4 GenSpring 2 8 Northern Trust 4 3 J.P. Morgan 5 6 U.S. Trust 15 2 Merrill Lynch 27 5 Morgan Stanley 29 9 New Competitive Landscape Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
      • 30 Single-Family Offices Participating to Date
      • Range of Assets Supervised = $450,000 to $2B
      • Chief Executive Is a Family Member at 44.8%
      • Average of 2.5 Generations, 14 Households Served
      • Family Households Not Served = 6.1%
      • Median Age of Family Office = 12 Years
      • Youngest = 1 Year, Oldest =100 Years
      • One in Six (16.7%) Part of an Operating Business
      2009 SFO Study Interim Report Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
      • An Overlay of Stress from Plunging Markets
      • Strong Underlying Concern about Sustainability
      • Single-Family Offices Inherently Unstable
      • Fighting the Reality of ‘Generational Decay’
      • You Are in a Scale Business, Like It or Not
      • Not Immune from Advisory Firm Economics
      • Recognition of Challenges They Face
      • Openness to Partnering & New Solutions
      The View from 10,000 Feet Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Top Challenges: SFOs & MFOs For the MFOs: Human Capital Business Development Managing Growth Technology, Client Reporting Marketplace Awareness Profitability Managing Client Expectations Economic Turmoil Invest. Client Portfolios Operational Efficiencies For the SFOs: 1. Gen./Family Relationships 2. Investments 3. Human Capital 4. Justifying Expenses/Budget 5. Sustainability & Strategy 6. Financial/Generational Plan. 7. Consolid. Reporting/Tech. 8. Liquidity & Cash Management 9. Compliance, Tax and Legal 10. Managing Growth
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Of the MFOs: Advice on Private Equity Trustee Services Advice on Job Search Property-Casualty Risk Review Gold Investments Partnership Accounting Enhanced Tax Reporting Foundation Consulting Family Education Rising Expectations: What Clients are Asking For Now Of the SFOs: Aircraft Management Managing Newly Acquired Business Family Investment Partnership More Family Communication Estate Planning Foundation Management Family Education
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Overall Strengths ( S ) & Achilles Heels ( A )
      • MFOs SFOs
        • Client Trust/Office Integrity S S
        • Financial Planning S A
        • Scale S A
        • Investment Management S A
        • Fiduciary Management A S
        • Family Ed. & Communication A S
        • Client & Office Intimacy A S
        • Inter / Intra-Family Interaction A S
        • Consolidated Reporting . A A
        • Security A A
      Complementary Skills
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved . Comparison of Scalability: I Mean Size of Participating MFOs @ $3.8 Billion AUAs Mean Size of Participating SFOs @ $450 Million AUAs
    • MFO AUAs * SFO AUAs * Tier Assets Per Employee Per Employee I >$5B $182.6M $100.2M+ II $1B->$5B 94.1 83.4 - 100.2 III $0.5B-<$1B 90.3 54.3 - 83.4 IV <$0.5B 26.1 18.7 Comparisons of Scalability: II … but Research Is Inconclusive that Scale Translates into Efficiencies * Sample From Participating MFOs & SFOs Only Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Tier Assets ________________________________ I >$1B 28.0 45.9 II $0.5B-<$1B 39.0 41.2 III $100M-<$0.5B 40.0-51.0 71.5 IV <$100 40.0-62.0 231.6 Mean MFO * Fees in BPs Mean SFO * Costs in BPs However, the Data Suggests MFOs Do Have the Early Advantage in Fees vs. Costs. Comparisons of Scalability: III * Sample From Participating MFOs & SFOs Only Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Strategic Trends: I What are these Barriers to Collaboration?
      • Blurred Lines : Families & Their Advisors are Confused
      • Privacy & Control : “We Keep the Jet”
      • Family Indecision : Poor Communication & Governance
      • Lack of Culture Fit : Between SFOs & MFOs
      • No Def. of Success : MFO’s Profit vs. SFO’s Sustainability
      • Continued Human Capital Shortage : Especially RMs
      • Inefficiencies : MFOs & SF0s Dealing with Outsourcers
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Strategic Trends: II Key Drivers of Collaboration Will be the Following:
      • Scale Advantages
      • Human Capital Requirements
      • Demands of Family Members
      • Complementary Nature of MFOs & SFOs
      • Necessity of Sustainability
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Implications of Current Landscape
      • MFOs Courting SFOs: Teenage Girls Not Yet Dating
      • Differences of Perspective & Def. Of Success
      • Not Yet Fully Understood
      • MFOs Better Off Courting More Established SFOs
      • SFOs Largely in Denial, Not Trusting Alternatives
      • Outsource Providers Confused by Lack of Courting
      • Period of Transition Will Last for a While
      • Will Necessities Overcome Mis-Understandings?
      • Will Venus & Mars Ever Hook-Up?
    • What Business are You In? Source: Marketing Myopia by Theodore Leavitt © 1960 in Harvard Business Review Your Firm 1. Manf. Trains & Track? 2. Railroading? 3. Transportation Biz? 4. Logistics, Warehousing & Delivery? Be careful not to repeat the same mistake the railroad companies made in too narrowly defining their business! Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Trends & Implications Compensation Services Providers Threats 1970s Commissions Estate Planning Deregulation 1980s Technology 1990s Fee Only Complacency 2000s MFOs 2010s Banks, Ins. Cos, & Wire Houses Private Banks & Mutual Funds Financial Planning Financial Planners Asset-Based Fees Family Office Annual Retainer Trust & Scalability Human Capital Challenges/ Fee and Commissions Investment Management The Collaborators Family Wealth Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Ten Crosscurrents in Family Wealth
      • More Choices for Families
      • Renewed Focus on Family Gov.
      • Nurturing Non-Financial Wealth
      • Wanted: Objective Advice
      • The Standards of Stewardship
      • Concern: Sustainability of SFOs
      • Turmoil: Traditional Providers
      • Firms are Nat’ Driven by Scale
      • Family Wealth is Going Global
      • Families Remain Confused
      • Families: Confusion to Understanding
      • Family Governance is More Practiced
      • NextGen Remains an Enigma
      • Deceit Remains & Fueled: Human Greed
      • Commissions Become Extinct
      • Obj. Adv. the Norm, Best Advice Wins
      • Savvy Competitors Learn to Collaborate
      • Cycle Repeats of Consol. & Spins-Offs
      • Prof. Desig. & Career Track in FW
      • Global Is Common, Efficiencies Aren’t
      GenSpring Family Office’s 20 th Anniversary Compendium of Thought Leaders’ Views on Major Trends: The Alliance Authorship of the Above by Invitation Current Landscape Landscape in 20 Years
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
      • Competitive Landscape: Families & Firms
      • Fee Charging Alternatives
      • Outsourcing/Collaboration: Family Office Services
      Three Take-a-Ways for Your Business
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
      • Customized Consulting
          • Private Families
          • Firms
          • M&A Advisory
      • Involvement Offering
      • At 3 Levels:
            • Executive
            • Leader
            • Advocate
      • Proprietary Research
          • 6 th Annual MFO Study
          • 2 nd Annual SFO Study
          • 1 st Private Client Survey
      • Unique Events
          • 40minus Leadership Summit
          • The Alliance Spring Event
          • The Alliance Fall Forum
          • Regional Workshops
    • Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved. Building Bridges Thank You!