What are the barriers?
Of the advisors who indicated no interest in the model (a total of 104) over three-quarters said they simply did not see the benefit. Other popular answers were that clients weren’t interested, that the advisors themselves weren’t interested in delivering non-financial services, and that these services were either too costly or complicated to implement.
These negative opinions regarding the model are “partly a function of experience,” says the report, as more than half of the firms answering in this way had tried unsuccessfully within the past five years to offer such services.
“However, from our findings, it’s safe to conclude that many of these advisors recognized innate potential but did not have enough wealthy clients from the onset. As a result, some of these early adapters introduced products and services that offered little value to existing clients and were not consistent with the expectations of the ultra-wealthy individuals they were hoping to attract,” said Alan Kufeld, a principal in the Rothstein Kass Family Office Group.
The outsourcing question
One of the difficult questions advisors considering expanding their services need to consider is which services it will be more efficient to outsource, says Rothstein Kass. A simple starting point for this analysis, the report proposes, is the number of high net worth clients, as the greater number of clients wealthy enough to afford MFO services an advisor has, the stronger the argument for adding in-house services.
For most financial advisors, however, “a more effective method” of delivering additional services will be to bring in specialists as and when needed, sharing revenues where appropriate, according to the report – establishing a so-called “virtual multifamily office” on a variable-cost basis.
As the key to this approach is selectivity, the report recommends starting any change in business strategy with evaluating and profiling current clients so as to identify potential opportunities. The report lays out a system called the “whole client model” to do this, which entails understanding wealthy clients from many perspectives: from their age, gender and profession to their interests, important relationships, the sources and nature of their assets and liabilities, and their goals and objectives.