Published: September 13, 2012
By Dr Lilli Friedland - President, Executive Advisors
Financial advisors and estate attorneys in the US are currently being deluged with requests by high net worth families deciding to gift family members varying sums of financial or other assets. Citing the uncertainty surrounding future US tax laws, HNW families are frequently electing to gift family members rather than potentially pay higher government taxes (Source: BYN Mellon, Entrances, Exits, and Mid-Course Corrections for Wealth Transfer Tools). Many families focus on financial assets. Upon further reflection, however, most family leaders recognize the significance of also imparting their family values, history, and traditions – their social-emotional legacy to their children.
When considering their unprecedented opportunity to give, family leaders frequently confront conflicting emotions. Many family leaders fear that their children may squander the financial wealth that they inherit due to a lack of financial discipline or a lack of professional ambition. Other family leaders want their children to develop themselves and achieve financial independence on their own prior to receiving these gifts.
Due to the 2008 financial crisis, some family leaders are now concerned about having sufficient funds for themselves (source: Peter Orszag, Bloomberg). Adding to the complexity of the decision, grantors are aware that the transfer of financial wealth is often compromised by (i) interpersonal conflict and incompatible narratives among the inheritors, (ii) disagreements on mutually-required decision-making, and (iii) the lack of maturity and development of individual family members. As such, it comes as no surprise that 70 per cent of intergenerational wealth transfers fail, according to Forbes.
The role of advisors
What can financial and legal advisors do to facilitate the successful transfer of family wealth? Trusted advisors, often with the assistance of family systems experts, incorporate the concept of wealth transfer on multiple occasions as they work with the family, noting that financial and social-emotional wealth are intertwined. Both elements of the transfer of family wealth must be part of the ongoing conversation between the advisor and family leaders over the years that they work together.
The transfer of wealth between generations is a multi-year process, not a momentary event. Just as achieving financial goals requires careful and strategic planning, so too does the achievement of social-emotional wealth goals. According to research conducted by Barclays, whether transferring financial wealth of a family business or other assets to the next generation, the planning is frequently not started early enough. To ensure success, family members need to be accustomed to incorporating and using the tools and processes that promote effective family relations (source: Dennis Jaffe and Jane Flanagan, The Best Practices of Successful, Global, Multi-Generational Family Enterprises, Family Business Network and Family Office Exchange).
HNW families are distinctive from one another in various ways. Before earning trust and building confidence in their role, advisors need to understand the intricacies of each family with whom they work. Most importantly, advisors must identify how the elder generation defines the family, and who is considered to be a part of the family. This is often a complicated and fragile process as some families have gone through multiple marriages, divorces, disinheritance decisions, inclusion of family-of-origin decisions, and adoptions.
Although family leaders have multiple expectations for the next generation, frequently their thoughts have not been shared with family members or integrated in parenting practices. Family members have a much greater opportunity to succeed when they know others’ expectations of them. Further, the earlier individuals learn about their roles and responsibilities within the family system, the less likely they are to grow up with a sense of entitlement. As a result, family wealth and financial advisors are increasingly introducing family systems experts into the transfer of family wealth process, particularly at early stages.
These family systems experts (i) clarify the family vision, values and shared narrative, (ii) integrate family legacy practices, (iii) build interpersonal dynamic skills, (iv) facilitate conflict resolution, and (v) develop each family member’s strengths. When extended family members feel secure about their roles, knowledgeable about their obligations, and consistently use established processes to resolve conflict, family members are more aligned with one another and share in the family’s legacy. More specifically, family systems experts become part of the trusted advising team focusing in the following areas:
• Creating the family’s social-emotional legacy: clarify and integrate the family leaders’ most significant priorities regarding the family’s values, unique family traditions, and history.
• Building relationship skills: understand interpersonal similarities and differences, and cultivate trust and interpersonal bonds among the members of the extended family system.
• Developing family continuity processes: facilitate conflict resolution, and incorporate conflict resolution strategies into the extended family system. Build a shared narrative.
• Identifying each family member’s social-emotional motivators: establish processes to assess and cultivate each member’s capabilities, interests, and drive. Align the individual goals of family members with the family’s long-term vision, mission and values.
• Facilitating knowledge transfer: support inter-generational general discussions about the family’s personal social and financial history, social-emotional priorities, and anticipated future needs so that all family members understand the family’s “big picture” perspective.
• Managing social-emotional influences: promote the understanding, through open dialogue, of societal pressures from non-family members regarding the perceived financial/power status of the family. Help family members manage their own and others’ expectations.
• Clarifying boundaries and expectations: communicate any criteria regulating the transfer of family wealth at an early stage in the next generation’s life in order to prevent undesired behaviors and minimize surprises when consequences are enforced (e.g. substance abuse).
• Grooming the next generation of family leaders: develop both the social-emotional and financial leadership competencies among the extended family members. Build leadership skills to promote the family’s goals. Integrate strategies of inclusiveness and engagement in the extended family system.
Studies indicate that the most successful multi-generational families routinely employ these best practices. The family needs a shared narrative, effective communication processes, and a desire to continue its legacy in order to ensure the family can manage situations of transition and crisis.

Feature
Published: August 17, 2012
By Harriet Davies - Editor - Family Wealth Report
The world’s most successful, multi-generational families routinely adopt best practices on maintaining personal relationships, family governance and next-generation development, a new study by the Family Business Network and Family Office Exchange finds.
The study, authored by Dr Dennis Jaffe of Saybrook University, along with Jane Flanagan of FOX, defines and compares the best practices used by 192 of the world’s most successful families, drawn from the two organizations’ pool of members. The study characterized the families as successful due to the high proportion of third- and fourth-generation families present in the sample.
One of its key findings is that successful families make use of best practices “significantly,” and expect to increase their use of them over time. The findings are also consistent across families around the world, with participants drawn from North America (57 per cent), South America, Europe, Asia and Australia/Oceania. They are also consistent across families who still own a legacy business and those who don’t.
In terms of assets, 87 per cent of the participant-families have over $50 million and 23 per cent have over $1 billion. Some 68 per cent still own a legacy business.
“The major insight is that a family has to plan and be conscious not just about their financial safety but also about their family’s communication, connection, trust and teamwork,” said Dr Jaffe. “We found in this survey that the most successful families were doing these things; the question now for a family is not whether to do them, but when and how.”
As is often said, the generational transition is a pitfall for many families: the FBN/FOX report cites the Family Firm Institute in saying that only a third of family businesses survive as they cross generations; of those, under 10 per cent manage a successful second transition.
Once a family has sold its legacy business it can still operate as a “family enterprise,” the report lays out, with shared investments and a shared wealth-creation function. Many families, however, “do not survive the generational transition,” because they do not adopt internal governance practices and manage emerging realities.
Three pathways
One of the biggest challenges is the way families sprawl over time to include several related households, so governance practices must counter a tendency toward dissipation and fragmentation. To do so, the paper found that families adopted practices that spanned the inter-connected worlds of family, business and finance.
The critical practices for success are distributed along three overlapping pathways, it says.
• Path one: “Nurture the family”
In this pathway, the business is sold within the first generation but substantial wealth is passed on, with second-generation siblings starting their own families. As such, cousins grow up separately, and to maintain a family enterprise the family must actively build communication and shared values.
Best practices on this path include sharing philanthropic activities, ensuring regular and extended family gatherings, as well as fostering a climate of openness and trust, and respect for the family’s history and legacy.
• Path two: “Steward the family enterprises”
In the second scenario, the family still owns a business together. In this case, as the family base grows, expectations for ownership of the business need to be addressed.
Best practices include having a strategic plan for family wealth and/or enterprise growth; an active, diverse and empowered board; ensuring transparency about financial information and business decisions, and being explicit about shared shareholder agreements governing family assets.
• Path three: “Cultivate human capital for the next generation”
The third pathway is focused on developing the human capital of the younger generation and preparing them for their roles within the business and family, ensuring they feel connected with the family’s legacy.
Best practices include employment policies for younger members within the family enterprises; agreement on values about family money and wealth; financial education for the younger gen, matched to their age as they grow; and, crucially, support to develop the next generation of leadership.
“Highly engaged” in best practices
The families involved in the report are highly involved with best practices and the trend is for greater use of them over time, say Jaffe and Flanagan, who developed a composite index to measure how important families believe these practices are now, and how important they will be in the future.
These indexes allowed the researchers to identify areas where the most work was needed to bring the use of practices in line with families’ vision for their future use. By this measure, families will be looking to increase their use most of the following practices:
1) Support for development of next-generation leaders;
2) Exit and distribution policies for individual shareholder liquidity;
3) Strategic plan for family wealth and/or enterprise development;
4) Climate of openness, trust and communication;
5) Clear, compelling family purpose and direction.
What kind of model for wealth management?
The report also delved into how families managed their wealth, and found that even in cases where the legacy business was still owned by the family, it had often branched out to make use of other forms of wealth management.
Over half (57 per cent) reported having a single family office; 11 per cent relied on staff advisors within the family business; 10 per cent used a private bank or wealth advisor; 5 per cent were part of a multi-family office, and 4 per cent used a private trust company.

Allan Starkie, Ph.D. is a partner at Knightsbridge Advisors, an executive recruitment firm specializing in wealth management.
Published: August 09, 2012
Over the last four years, 64% of our searches have targeted two types of revenue generating professionals: the rarest of creatures, million-dollar revenue producers, and relationship managers with a strong sales component to their responsibilities.
However, top revenue producers are becoming increasingly rare and recruiting relationship managers with sound production records does not ensure client portability. As a result, firms also should focus on back-end structured team lift-outs and strategic acquisitions.
Although occasionally teams actively seek to move together, more often team lift-outs must be created. That tends to cost less and also increases the likelihood that clients will move with the team. If an intact team is marketing itself, it’s safe to assume that the team approached a number of firms, driving the cost considerably higher. Creating a lift-out team also allows the acquiring firm the element of surprise, which always increases portability. By contrast, if a team is selling itself, it is virtually impossible for their employer not to get suspicious and begin developing a contingency plan to retain their clients.
The first step to creating a lift-out team is identifying institutions in which a “hard-wired” client team is the prevalent model. That is to say that a relationship manager has an actual team in which the same specialists surround each client relationship. The key players need to be the portfolio manager, trust administrator and lead relationship manager, but it’s also beneficial to bring any support personnel that actually engage in frequent interaction with the client.
Typically, the best way to construct a lift-out is to approach one of the senior members of the team as if you were recruiting him or her individually. However, the hiring institution sincerely should be willing to hire this professional, even if the team does not follow immediately.
During the initial interview process, after establishing trust, pose the question of a team lift-out. If the professional is amenable to the idea, be sure to examine any non-solicitation agreements undertaken by the employee. Then, if no non-solicitation agreement exists, the lead employee can act as the negotiator and spokesperson for the team.
However, if he or she is prohibited from soliciting employees, the recruiting firm must contact each team member individually and create the lift-out in a manner in which the members are not perceived as soliciting each other. It’s also important to orchestrate the method and timing of the mass resignations and have complete clarity on any restrictions regarding soliciting clients. Since restrictions usually apply, create bonuses based on portable assets on a success basis, never as upfront sign-on bonuses.
Under the right conditions, RIA acquisition can be a viable solution to quick asset growth.
However, don’t try to roll-up a series of disparate RIAs under the illusion that it will drastically cut overhead costs and create a more efficient organization through economies of scale. Instead, focus on acquiring only those firms that will be a good fit into your firm’s culture. Then, procure them in a manner that will benefit the key staff of the acquired RIA as well as your firm’s strategic goals.

Daily News Analysis
Published: July 31, 2012
By Eliane Chavagnon - Reporter
With over $40 trillion projected to fall into the hands of the younger generations in the US in the coming decades, wealth management firms must focus on this “new wave” of investors and re-evaluate their current service, support and technology models, new research shows.
The report by Scivantage and Aite Group - The Race for Next-Generation Assets: Can Banks Maintain Their Lead - examines the investing preferences of younger generations and the impact such preferences may have on long-term growth opportunities for wealth management firms. The findings suggest that those financial institutions which understand and address the changing needs of this “emergent sector” will be well-positioned to capture their future wealth.
In a sign that young consumers have yet to find their ideal investment providers, Sophie Schmitt, senior analyst at Aite Group, said those from Generations X and Y have been “far less loyal” to their investment providers over the last few years, compared to the boomer and “silent generation” of investors.
“Banks seeking to maximize their ability to retain and grow share of wallet with young investors should work on growing their online investing capabilities and providing more convenient services,” she said.
Key highlights of the research include:
- While 40 per cent of young investors still consider a bank as their primary investment provider, only 20 per cent think of an online brokerage firm as their primary investment provider - despite their strong adoption of online trading;
- 44 per cent of Gen X and Y investors surveyed have transferred assets to another investment firm, or switched investment providers due to availability of online tools;
- 42 per cent of Gen X and Y respondents said they would only move additional assets into their bank if “more convenient” services and/or “more robust online brokerage/trading capabilities” were offered;
- Some 30 per cent of young investors trade over 25 times per year, and just under 70 per cent trade online more than five times per year;
- Fees are the primary reason why clients move investments to another firms.
“Online investing capabilities are now second nature to Gen X and Y investors and will be a requirement for banks that want to attract future high net worth or current affluent members of this segment,” said Chris Psaltos, vice president of product management at Scivantage.
“As younger, tech-savvy investors look for greater control of the investment decision-making process, wealth management firms, particularly banks, must ensure that their online investment platforms are keeping pace with the latest consumer technology innovations,” he continued.
Some firms have already started to tackle this issue. In February, for example, US Trust expanded its “Financial Empowerment Program,” a web-based tool for “tech savvy Generation X and Y” young adults who are beneficiaries of wealth. In doing so, the firm cited the 2011 US Trust Insights on Wealth and Worth study, which also found that HNW parents are concerned about raising children of wealth. Just 34 per cent of HNW parents surveyed strongly agreed that their children will be able to handle the inheritance they plan to leave them. Similarly, two-thirds (67 per cent) of parents agreed that their children would benefit from discussions with a financial professional.
The Scivantage/Aite Group report is based on Aite Group’s December 2011 survey of over 1,000 US investors with at least $25,000 in investable assets and who have access to online trading capabilities.

A record 62 per cent of ultra-wealthy respondents to the Institute for Private Investors’ annual performance survey reported using an advisor for over half their wealth.
Published: June 06, 2012
By Harriet Davies - Editor - Family Wealth Report
The IPI Family Performance Tracking survey, which covered 57 families with at least $30 million in assets, is conducted in two parts. Data released earlier this year revealed families’ anticipated investment strategies while the latest survey, completed in April, examines actual allocations and performance.
It found that 45 per cent of respondents increased their allocation to commodities, while 31 per cent increased their exposure to real estate, and 22 per cent to private equity. “Investors also increased their municipal holdings and decreased investment in hedge funds/funds of funds,” said IPI.
Wealthy families are worried about geopolitical risk and domestic policy shifts, according to the survey, with 70 per cent of respondents expressing concern about this. Nearly half of respondents were concerned about the scarcity of yield opportunities.
Returns for 2011 “varied widely,” said IPI, from -10 per cent to 25.1 per cent net of fees. The majority of families, though, reported returns in the range of -2.16 per cent and 2.28 per cent net of fees. Families seeking principal protection last year fared better than those pursuing growth, with nearly two-thirds of the first group achieving positive returns compared to less than half of the second group.
“This year’s data reinforced the investment trends we have been seeing among the ultra-affluent as far as the rise in allocation to commodities and real estate, and the continuing popularity of direct investment in private companies,” said Mindy Rosenthal, IPI executive director. “Families are also concerned universally about risk, both abroad and at home.”

Breaking News
Published: May 24, 2012
By Harriet Davies - Editor - Family Wealth Report
Over three-quarters of financial advisors are interested in some form of the multi-family office model, according to a new report from Rothstein Kass’ Family Office Group, due to a belief it can help attract new and wealthier clients, build stronger relationships and, ultimately, deliver higher revenues.
Specifically, 61 per cent of the study’s sample group (477 advisors) said they are interested in delivering MFO services to “select wealthy clients,” 17 per cent are interested in delivering “a comprehensive platform,” and 17 per cent are not interested in the model. The research also found there was a link between the success of the financial advisor – in terms of income – and interest in the model.
However, the report also raises the many challenges a transfer to the model entails. For example, the 292 advisors who answered that they are interested in delivering MFO services to select wealthy clients have fewer than four wealthy clients on average, the survey found.
One model which addresses the “common scenario” of having a handful of very wealthy clients dispersed among many less wealthy clients, is to focus on providing exceptional service to the best clients, the report says. To do so successfully, a good starting point is “identifying a few key relationships” as well as the needs of these clients and the similarities between these needs, said Richard Flynn, principal and head of the Family Office Group.
This challenge highlights the difficulties around the multi-family office over issues such as cost, as well as the boundaries around it: when does an advisory firm become a multi-family office, and how firm are those boundaries? In an ongoing poll on Family Wealth Report, 64 per cent of respondents said “yes” when asked whether the model was “too vague and increasingly indistinct from wealth management firm.”
For purposes of the study, the array of family office services covers the wealth management side (investment management, advanced planning and private investment banking) and support services (such as administrative and lifestyle).
In the Rothstein Kass study, of those advisors that have at some stage implemented family office services, only 17.9 per cent felt they had been successful, while over half felt they had been “somewhat successful” and just over a quarter felt the move had been unsuccessful.
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.

Daily News Analysis
Published: May 01, 2012
By Harriet Davies - Editor - Family Wealth Report
A group of RIAs has teamed up to form an industry council, with a plan to meet regularly and produce thought leadership on business growth strategies for independent advisors.
The members of the new “aRIA” group include: Brent Brodeski, chief executive of Savant Capital; John Burns, principal at Exencial; Ron Carson, CEO of Carson Wealth Management Group; Jeff Concepcion, CEO of Stratos Wealth Planning; Matt Cooper, president of Beacon Pointe Wealth Advisors; and Neal Simon, CEO of Highline Wealth Management. The associated firms collectively advise on $18 billion of client assets.
As part of the group’s work, it will release white papers on long-term growth strategies for both independent and wire-house advisors, beginning with a paper due for release in the third quarter of this year.
“The group aims to make clear that advisors have many alternatives to growth versus going it alone, joining a roll-up/consolidator operation, or attempting to execute on recruiting or acquisition strategies themselves. Each participant in the study group is fully independent of private equity or venture capital and therefore free to operate under a purely synergistic framework, rather than simply looking for a good financial ‘deal’,” the firms said in a joint statement.
There has been an increasing focus on development strategies for RIAs, as these types of wealth managers become more important in terms of market share. According to a report from Cerulli Associates, which came out earlier this year, the registered investment advisor/multi-family office segment of the wealth industry grew its assets under management by 18 per cent in 2010, the fastest rate of any type of financial player.
This has caused many businesses to examine ways of growing within this segment. For example, Genworth Financial Wealth Management, a subsidiary of Genworth Financial, this month launched a “business transition services” program, which provides lending services for advisors seeking to expand their practices. Technology firms are also looking to serve this market, and this month FolioDynamix unveiled a suite of products aimed at family offices and registered investment advisors.
RIAs themselves are turning their attention to increasing profitability and competitiveness. In this environment, aggregators such as Focus Financial have expanded quickly. Last year Focus completed eight deals, and so far in 2012 it closed a $220 million revolving credit facility, with a further $100 million available, as it looks to further expand through acquisitions.
Meanwhile, an example of a merger this year between RIAs is that of Savant Capital Management and The Monitor Group, both fee-only RIAs, which are combining to form a larger-scale firm with $2.7 billion in assets under management. The combined business, Savant Capital - a member of aRIA - has ten offices across Illinois, Wisconsin, Virginia and Florida. Both firms are members of the Zero Alpha Group, a network of independent advisory firms, through which they met and, ultimately, decided to merge.
Advizent also recently launched as a membership organization for the RIA channel, which – according to its website – is “dedicated to making independent RIAs the market share leader in wealth management nationwide.”
Commenting on the formation of aRIA, John Furey, principal at Advisor Growth Strategies, a member firm, said: “This is a special group of individuals and firms coming together to highlight growth strategy options for advisors looking to materially increase their firm’s enterprise value. Each firm associated with the group has a proven track record of success in the industry, and aims to raise awareness of the different options advisors have when focusing on growth of their practices.”

Feature
Published: April 25, 2012
By Harriet Davies - Editor - Family Wealth Report
Ultra high net worth individuals are still in wealth preservation mode, according to the latest Spectrem Group quarterly survey, with more than half saying it is more important to protect principal than grow their investments.
However, willingness to take risk rises among those in the highest wealth segment, with around 53 per cent of respondents in the $15-$25 million segment saying they are willing to take “significant” risk in a portion of their portfolios to achieve a higher return, according to the Investment Attitudes & Behaviors survey.
The sample group
Breaking down the UHNW sample group, which was made up of 482 respondents with a net worth between $5 million and $25 million not including primary residence, shows that nearly two-thirds are retired and around one-quarter are still working, with the remainder being “semi-retired”.
Retirement does not appear to be a worry for this segment, with 90 per cent predicting they will be able to live comfortably through retirement.
Senior corporate executives accounted for 18 per cent of the sample group, followed by entrepreneurs (15 per cent), and professionals such as accountants, doctors and lawyers (13 per cent).
Advisor dependency
It appears that the wealthy are less dependant on advisors than a year ago, with around 16 per cent of individuals ranking themselves as “advisor dependent” (where an investment professional makes nearly all investment decisions), down from 23 per cent last year, the survey found.
While the self-directed segment has remained constant at around 27 per cent, more people now identify themselves in the “advisor-assisted” group, as well as “event-driven”, where they make their own investment decisions but use an advisor for specialized services such as retirement planning and asset allocation or alternatives advice.
Furthermore, 60 per cent of the sample group said they enjoy investing and do not want to give it up, and 58 per cent like to be “actively involved” in the day-to-day management of their portfolios.
Drawing a conclusion from this, Spectrem Group says the UHNW “are likely to enjoy discussing investment strategies with their advisors,” and that advisors should therefore provide well-informed and holistic strategies for discussion.
Younger generations
According to the survey, the young are less concerned about taxes than their older counterparts, with only 73 per cent of the younger respondents (44 and under) saying tax implications are a selection factor in their investments compared to over 80 per cent for all other age groups.
A similar story applies to the level of risk associated with investments, with 76 per cent of younger respondents citing this as a selection factor for investments, compared to over 90 per cent for all other age groups.
Conversely, younger investors are more likely to consider social responsibility as a factor, with 57 per cent of the youngest age group citing the social responsibility of an investment as a selection factor.
“Socially responsible investing will increase dramatically within this segment,” says Spectrem.
Where did the wealth come from?
Nearly all UHNW respondents to Spectrem’s survey identified hard work as the secret to their financial success, with a full 96 per cent citing this as a factor behind wealth creation. Education also featured highly, cited by 91 per cent, as did smart investing (87 per cent), frugality (75 per cent), and “being in the right place at the right time” (68 per cent). Taking risk was also a factor, as 61 per cent of the wealthy sample group thought this was a factor behind their success.
On the other hand, family connections and inheritance were only cited by 13 per cent and 32 per cent of respondents respectively, indicating that wealthy people tend to feel they have earned their status, rather than had it “given” to them. When responses were broken down by age, younger people were more likely to cite family and inheritance as reasons behind their wealth.
Concerns of the UHNW
Political concerns have risen over the past year, according to the report, with 80 per cent of ultra-wealthy individuals saying they are worried about the political environment, compared to 73 per cent the year before. The national debt was a concern for 82 per cent, up from 81 per cent a year earlier.
The upcoming general election is a worry to around three-quarters of wealthy individuals, according to Spectrem’s survey, while the proportion of wealthy people worrying about tax rises appears to have decreased – from 73 per cent a year ago to 65 per cent today.
Anxieties about inflation also seem to be waning slightly among the rich, with 60 per cent saying this is a concern in the latest survey compared to 65 per cent a year earlier.
But worries about wealth remain…
On the other hand, it seems that even as worries over tax rises and inflation have dipped slightly, concerns about maintaining wealth over generations have not diminished. In fact, two-thirds of survey respondents said the financial situation of their children and grandchildren was a source of worry to them.
“Maintaining their current financial position is one personal concern that has dramatically increased from 2011,” says Spectrem in its report.
The reason for this may be linked to costs associated with education and healthcare, for example, as survey respondents appeared to be more worried than a year ago about issues such as personal health and financing education for descendants. Spectrem also noted that almost half of the UHNW in the survey were financing the education of their grandchildren.

Daily News Analysis
Published: March 27, 2012
By Wendy Spires - Deputy Group Editor
Wealth managers are increasingly offering lifestyle services or rewards programs in a bid to differentiate themselves in today’s highly competitive marketplace, and now Barclays is upping the stakes with a new lifestyle web portal intriguingly called Little Book of Wonders.
The “wonders” of the portal’s name refer to a range of money-can’t-buy, pre-vetted events and experiences which are exclusively available to clients of the bank’s wealth and investment division. The events and experiences are organized around 16 lifestyle themes, ranging from food and travel to arts and culture, and have been created in collaboration with high-end brand partners such as Rolls-Royce, Boucheron and Hassleblad.
The portal is also intended to function as a networking platform for clients and will additionally feature extensive editorial content written exclusively for Barclays by a team of leading contributing editor “names”. This will include articles about all the exclusive events, talks and experiences on offer, as well as features related to each area of interest.
Rollout
The portal will initially be rolled out to Barclays’ wealth management clients in the UK and Europe, with a view to rolling out in the US and Asia-Pacific in the second half of the year and MENA soon after. This phased implementation is simply to allow the new service time to bed down and for the focus required in deploying extremely high-end events across multiple geographies, Barclays said. In the meantime the service can also be offered individually to globe-trotting clients who may be interested in opportunities in Europe from launch.
Barclays calls the new initiative a “client engagement tool” and in putting it together the firm said it went back to the drawing board to entirely rethink the traditional concierge service and try to create something unique in the marketplace.
Rather than being your standard concierge-type service which tends to be reactive, in that clients come up with an idea to be arranged on their behalf, Barclays’ new service offering proactively sources opportunities for clients to browse and select. As such, Little Book of Wonders is intended to be something more akin to a “curated world”, David Hughes, head of affinity partnerships at Barclays, told WealthBriefing. (This is the sister publication of this website).
“We’ve created an environment where our clients can come and discover some fascinating and exclusive things to do that we have pre-arranged and curated on their behalf, rather than the traditional model where the client has to have the idea in the first place to ask their concierge service to execute,” said Hughes.
Genesis
The idea for the new service came from the fact that luxury brands would often approach Barclays to offer its clients the chance to attend special events, but often these opportunities were last minute or so esoteric that it was difficult to offer them to the right clients in enough time. Effectively, Little Book of Wonders allows clients to “self-select” the kinds of events they are interested in, making the process far more efficient for client and luxury brand alike.
The web portal goes live this week and clients will be introduced to it in the course of their conversations with their bankers. Reactions from staff and brand partners, meanwhile, have been “fantastic”, said Hughes. Bankers are really excited about being able to offer something unique in the marketplace, he continued, while brand partners all over the globe have given “phenomenally encouraging responses.”
The site is very visually appealing and it is easy to find opportunities to suit any taste, via the interest area “bookcovers” like “beauty and wellbeing” as well as a comprehensive search function. Users can also search by region or date – a very useful facility for special occasions such as birthdays or VMoney-can’t-buy experiences
There is a wide range of events and experiences on offer (around 70 at launch), most of which are free and all of which are exclusive to Barclays. Forthcoming highlights for next month include an evening at Sir Terence Conran’s apartment to hear about commissioning a dream home, a round of golf with Colin Montgomerie at Goodwood with Rolls-Royce, and an Easter egg masterclass for children being held at Claridge’s in London.
However, the personal favorite of Hughes - and one which will no doubt wow cricket fans - is a once in a lifetime opportunity to play a Twenty20 match with legendary England cricketer Freddie Flintoff. This last opportunity may put readers in mind of Société Générale Private Banking’s ongoing sponsorship of top-level golfers Angel Cabrera, Thomas Levet, Christian Cevaër and Jeev Milkha Singh, through which the firm is able to offer its clients the chance to play with golfing stars through a program of events around the world.
Strategy
The provision of truly special money-can’t-buy experience to reward “big ticket” clients is an important part of many firms’ marketing strategy, one reason for this being that the very wealthy are a segment for whom few doors are closed and as such they are unlikely to be impressed by mass market events.
Valentine’s Day.
While there may be a place for large (but inevitably cost-heavy) sponsorships in terms of building brand awareness, it is generally thought that smaller, bespoke opportunities are probably the better option, not least because they provide a more intimate environment for clients and bankers to deepen their relationships. Precisely-targeted events might be more labor intensive to put together but it could be argued they incur less “wastage” and are a far better way of demonstrating an understanding of the totality of clients’ lives – an empathetic, holistic approach which is rapidly becoming industry standard.
These were the type of views which emerged in the compilation of a forthcoming ClearView Financial Media research report, entitled Reaching Out To The High Net Worth: Branding And Marketing Strategy Across The Global Wealth Management Industry.
Barclays’ new website is also noteworthy for its high-tech approach to helping clients get the most out of the service; its back-end booking system will allow clients to check the availability of the events/experiences and book direct, which will in turn trigger an email to their banker to keep them in the loop. The initial concept behind the project was “time well spent” and so Barclays is keen to make the portal time-efficient to use.
Invaluable information
Clearly, Barclays isn’t launching this service just out of the goodness of its heart, as providing clients with money-can’t-buy experiences is a popular method through which wealth managers attempt to build up good will and do more business with their biggest clients, most of whom are multi-banked. It also goes without saying that such offerings help firms to gather invaluable information on where their clients’ passions lie and to exceed their expectations in terms of client service.
Lifestyle information which naturally accrues to a relationship manager over time may have historically been carried “in the head” of bankers (and away with them when they changed jobs), but firms are increasingly looking to gather this data systematically to mitigate so-called “key man risk”. Otherwise, an employee’s departure could mean that incredibly valuable information as to a client’s interests is lost forever – simply because it was never formally recorded.
Jacqui Brabazon, group head, marketing and philanthropy, at Standard Chartered Private Bank, who served on the editorial panel for Reaching Out To The High Net Worth, said this on the issue:
“As an industry I don’t think that we have terribly good systems in place to capture information which enables us to make the client experience better – to the extent to which other industries use that type of technology. Other industries use technology a lot to drive their client experience. We don’t as an industry; instead we rely on the private banker.”
While data capture systems may have historically been regarded with suspicion by the old guard of private banking, it seems that firms are increasingly recognizing the role technology can play in delivering “the personal touch”.

Feature
Published: March 21, 2012
By Harriet Davies - Editor - Family Wealth Report
The sports industry in the US was worth some $422 billion in 2011 according to one estimate from Plunkett Research and creates some very wealthy individuals. With many athletes suffering from bad financial advice, there is an opportunity for the wealth management industry to raise its game.
To give a taste of some of the salaries athletes earn, the New York Yankees – which has the highest total payroll of the Major League Baseball teams – paid an average salary of 6.8 million in 2011, according to data from USA Today. In the NBA, the Los Angeles Lakers – with the highest overall payroll - paid an average of $6.9 million in 2010.
Of course, for many sports stars their pay from playing may be a small component of their overall packet, with lucrative sponsorship and advertising deals on the table. But as wealth managers know, this kind of pay packet combined with media attention brings as many challenges as it does opportunities.
Many of these challenges are the exact same as those faced by other HNW individuals, with one big exception, says Paul Tramontano, chief executive of Constellation Wealth Advisors, a family office that works with sports industry clients.
That exception is that compared with a patriarch or matriarch, who has built a successful business over a long time, athletes are “more like lottery winners”: they have the monetary event early in their careers, and before they are well prepared with a team of trusted advisors, says Tramontano.
And he says that while oftentimes athletes are surrounded by a good support network of family, friends and an agent, when it comes to finances “the great majority is guided by the wrong people.”
“One of the greatest challenges that professional athletes face in their private lives is figuring out who they can trust,” agrees Richard Flynn, head of the Family Offices Group at Rothstein Kass and co-author of Fame & Fortune: Maximizing Celebrity Wealth.
“In 2008, we conducted a survey of 178 professional athletes and found that over 70 per cent believe that they have been exploited by advisors,” says Flynn.
One lawyer, Larry Landsman of Block Landsman, who has experience representing NFL players, says the stereotype of athletes being swindled out of their earnings by bad investment schemes is borne out by the reality.
He told Family Wealth Report: “The vulnerability of NFL players to fraudulent investment schemes is a cause of great concern to those of us who work with professional athletes. A confluence of several circumstances make many NFL players the target of a wide variety of investment scams: youth, lack of sophistication in financial matters, environment of trust and sudden wealth.”
For these players, their lives are “extremely focused on the demands” of their careers, and just 50 per cent graduate college, putting them at a disadvantage when it comes to finance and economics, explains Landsman.
Many players end up buying into high-risk private equity investments such as oil and gas limited partnerships, restaurants, entertainment facilities, car dealerships, airplane hangers, self-storage facilities, offered under misleading pretenses in terms of their liquidity and risk, says Landsman.
What makes this harder to recover from is that – in the case of an NFL player – the average career lasts only 3.5 years, according to Landsman, meaning that once earnings are lost it might be too late. He cites an eye opening statistic: 78 per cent of NFL players are either bankrupt or in financial distress within 2 years of retiring (source: Sports Illustrated).
Lifestyles of the rich and famous
Some of these post-career cases of hardship are not only due to bad investments but general mismanagement too, particularly on the spending side.
“Nearly 70 per cent of athletes we surveyed in 2008 reported that they lead a luxurious lifestyle. Though they recognize that this could be detrimental to their financial future, only a quarter of athletes reported that they are concerned about paying for that lifestyle,” says Flynn.
However, concerns about earning spans and long retirements are not unique to athletes, points out Tramontano, and may equally apply to people who get rich quickly through financial services, for example, such as successful investment bankers who burn out at a young age.
For any client vulnerable to this problem, Tramontano says Constellation now builds a simple graph, and explains to the client: “Here’s what you need to save to maintain your spending after retirement.”
Flynn points out the benefits of building a strategy for earning income outside of an athlete’s direct field by building a personal brand. Many superstars such as David Beckham and Tiger Woods have created huge brands in their own rights.
“Because of the visibility and popularity of professional sports, the athlete has unparalleled opportunities to generate secondary income. Respected athletes also have access to a wide range of second careers after they retire. Having the right advisors can help the athlete to make sound decisions in support of a comprehensive strategy,” says Flynn.
This tendency for a luxurious lifestyle and high spending means bill payment and tax filing are also important services for athletes, says Flynn, as is asset protection, as their high profiles often giving rise to lawsuits or divorce proceedings.
Another particular situation athletes face, says Tramontano, is that they often feel obligated to support their families – many of whom made significant sacrifices for the athlete along his or her way to success. Tramontano says he would never discourage an athlete from this view, but it’s important to make sure support is given in a strategic and efficient way.
In fact, it may be the case that it is necessary to distinguish more between financial help for families, and investments. For example, the Rothstein Kass research found that 78 per cent of surveyed athletes believed they had been exploited by friends and family.
Privacy and trust: the “lifeblood” of wealth management
It goes without saying that privacy and trust will be at the heart of any wealth management relationship, and in this light athletes are no different from other extremely wealthy clients.
“Many of our non-sports clients are household names and some of our sports clients aren’t,” says Tramontano. Whether you’re a billionaire business man or woman or a major league baseball player, privacy is of the utmost importance.
“The lifeblood of our business is confidentiality and trust,” says Tramontano.
However, it could be argued this goes one step further with clients such as athletes, as well as actors and artists, who attract the kind of media attention associated with A-list celebrity. They are extremely vulnerable in one sense: reputation damage can lead to the withdrawal of sponsorship contracts, as well as making life very difficult for the athlete (just think Tiger Woods).
“An athlete’s reputation is the most fragile aspect of the personal brand. It often takes a career to establish and can be erased by a single misstep,” says Flynn.
“Social media presents an opportunity for the athlete to connect with fans directly, but also poses risks – from hacked accounts to ill-advised ‘tweets’,” he adds.
Again, this might provide opportunities for wealth managers who include a lifestyle or consulting offering. Flynn says some services around brand management and business consulting can provide potential revenue streams for advisors, especially as less than 10 per cent of agents provide business venture support to clients.
Only fools rush in
It’s not a business that can be rushed into though. “It’s 100 per cent word of mouth and reputation,” says Tramontano. His firm has developed relationships with agents, lawyers and managers in the industry.
Also, it’s about cultivating quality relationships. “We’re not trying to handle every athlete…it’s a rifle approach rather than a shotgun approach,” he adds. With that said, he thinks it’s “a really important time for athletes and entertainers” because “over the last 20 to 30 years compensation levels have really ramped up.”
Tramontano points out that if you look back at the 1970s or even 1980s, players in the NFL didn’t make the kind of money that could set them up for life. “They worked extremely hard – it’s a hard job – but they didn’t make that kind of money.” Now, if they have a few successful years and the money is managed well they can change the rest of their lives and the lives of their descendants.
“If someone had plopped $20 million on my desk as a 20-year old I may not have done a brilliant job,” says Tramontano.
And this is why – when approached in the right way – the wealth management and sports industries can work together with benefits to both sides.

Daily News Analysis
Published: March 20, 2012
By Eliane Chavagnon
While 80 per cent of ultra high net worth American families say wealth creation requires a fervent work ethic, innovation has emerged as equally essential in safeguarding long-term wealth across generations, according to a poll by SEI.
A substantial 95 per cent of UHNW American families regard innovation as a key factor in their ability to continue being successful, and these families have simultaneously come to realize that doing so requires an ability to adapt to “changing conditions,” including the potential reinvention of business/financial strategies.
“Wealthy families are craving new ways of communicating and collaborating with their advisors, and new strategies for building and sustaining wealth,” said Michael Farrell, managing director for SEI private wealth management. “After everything that’s gone on in recent years, they understand that sometimes it takes a different approach to be successful.”
However, the consensus is less uniform on where this innovation will come from. Under half (41 per cent) of respondents believe that professional advisors are the “most likely source of innovation”, while over a third (37 per cent) expect innovation to stem from those in business, and a further third (36 per cent) expect innovation to come from younger family members.
The issue is important as, due to the way families expand over generations, combined with the difficult environment for generating reliable income, families are realizing the importance of inspiring younger generations to maintain living standards
Interestingly, despite the prevailing expectation that professional advisors are the primary source of innovation, the survey revealed that just 2 per cent of respondents consider wealth management as the most innovative industry (although only 34 per cent said the wealth management industry is not very innovative). Moreover, the survey indicates that there is “no real consensus” among wealthy families in terms of which areas of wealth management have seen the most innovation.
For example, according to 11 per cent of those polled, investment products are the area that has seen the most innovation. The poll underlined that investment advice was the area of wealth management that has seen the least innovation, as stated by 14 per cent of respondents, followed by reporting (12 per cent), and education and family communications (both 11 per cent).
Again, these findings highlight the importance for firms to develop new services such as goals-based planning and family dynamics offerings - an approach many are moving towards at the moment.
In response to the study’s findings, SEI has identified some of the innovative practices which are emerging within the wealth management industry, including:
- Real-life advice: it is important to take into account qualitative factors such as behavioural and decision-making process, as opposed to focusing solely on quantitative measures such as financial calculators and mobile phone apps;
- Designer investments: a new definition of investment, advocating objective, targeted and risk-adjusted strategies, as opposed to a “one-size-fits-all” approach, and
- Reporting progress: investors should have access to balances and transactions.
The survey involved over 100 individuals, representing families with at least $20 million in financial assets. It was carried out by independent research firm Scorpio Partnership.

J.P. Morgan has announced the launch of the J.P. Morgan Family Office Solutions Team in Europe, Middle East and Africa (EMEA). The newly formed group will focus on single family offices with a net worth of over $500 million across the EMEA region.
Published: March 13, 2012
“Given the increasing complexities and sophistication of single family offices, we have established a dedicated team who will focus on offering to this segment a range of customized services including tailored investment strategies, wealth planning, advice on family governance, philanthropic initiatives, and succession planning throughout the family office life cycle,” said Samy Dwek, who leads the J.P. Morgan Family Office Solutions team.
The J.P. Morgan Family Office Solutions team will provide single family offices access to an ongoing stream of investment themes and ideas, the team will also provide family offices a number of exclusive events that allow them to expand their networks and engage in conversations with influential leaders and experts from around the globe.
Pablo Garnica, head of J.P. Morgan Private Bank EMEA added, “Whether it is identifying and executing a unique investment idea, a niche M&A transaction or a credit strategy that solves multiple concerns, we believe that our unique combination of heritage, tailor-made solutions and excellence will enable us to deliver a first-class service to the wide-ranging needs family offices require every day.”

Published: February 09, 2012
By Harriet Davies
Regional banks may be seen as less glamorous than their Wall Street counterparts, and may not therefore be typically associated with high-end wealth management, but they have been increasingly active in this space over the past year.
As an example of this, kicking off 2012, Bryn Mawr Bank announced the acquisition of Davidson Trust Company, bolstering assets under management at the acquiring firm’s wealth management division by around $1 billion. The firm also previously acquired Lau Associates, a family office based in Delaware, and the private wealth management group of Hershey Trust Company, as well as launching its own trust division.
Picking up RIAs
Adding to this picture, the latest data from Schwab Advisor Services showed that purchases of registered investment advisor firms by regional banks had picked up: they were the acquiring firm in 10 per cent of cases last year, compared to just 4 per cent in 2010. While this figure remains below previous years – such as in 2005, when regional banks were the purchasers in 20 per cent of cases (source: Registered Rep) – it is nevertheless a marked increase.
Buying an RIA allows the bank to showcase its expertise, at a group level, of dealing with high-end clients, even if the RIA operates as an independent business unit. An obvious example is GenSpring Family Offices, which is an affiliate of SunTrust Banks.
“While each bank will have an individual concept in mind for acquisitions, they have a common perception that referring their clients to a bank-owned business, rather than to an outside advisor, can create synergies that are accretive. They can leverage the wealth management expertise of an RIA and increase their offering for high net worth clients,” said Nick Georgis, vice president, Schwab Advisor Services.
A recovering sector
“Banks appear to be coming back to life regarding acquisitions. They tend to have a cyclical interest in buying RIAs. They are coming out of a very difficult economic cycle and they are considering their next strategic move,” said Georgis.
However, he added that it was “really too soon to tell how active banks will become” in this space, and that, “because they tend to only buy locally, they are not likely to ever be as dominant as national acquirers or RIAs.”
Commercial property woes
Broadly speaking, the regional banking sector was badly hit during the financial crisis, with around 100 resulting failures as of October 2009, according to the Economist. Many regional banks were exposed to problems originating in the commercial property market, and did not have business models that were as well diversified as their larger rivals. In 2008 the S&P Regional Banks Index (Total Return) lost around 45 per cent. It made further losses in 2009 before bouncing back 29 per cent in 2010. Last year, it lost around 14 per cent.
However, as a group, regional banks are making progress: they have moved closer to overcoming the commercial real estate and loans problems of the crisis, and posted results above analyst estimates for the fourth quarter, according to a report in Reuters. This means they could now be looking ahead.
Larger, smaller players
There is, though, a distinction between the small regional players and the larger ones, such as US Bancorp and PNC. Larger regional players – in which some include giant Wells Fargo – have all been growing their brands steadily in the wealth management space. Last year Wells Fargo streamlined its offering for wealthy clients, creating Abbot Downing, and US Bancorp created a new brand for its ultra high net worth business unit, Ascent Private Capital Management, focusing on issues such as wealth transfer and legacy planning.
PNC Financial is another notable firm in this space, and according to a comment from its chairman and chief executive, James Rohr, in the bank’s fourth quarter earnings conference call in January 2012, regarding wealth management: “We will continue to invest in this business in 2012, as we see opportunities to capture a greater share of our current customers’ investable assets which we estimate to be more than $1 trillion.”
First Republic, a larger firm which concentrates on the core markets of San Francisco, Los Angeles, New York, Boston, Portland and San Diego, was rarely out of these pages last year, as it consistently expanded its operations.
Meanwhile, banks such as Fifth Third, Key Private Bank, and Regions Financial have made hires within their wealth management divisions lately.
It could be argued that regional banks stand to benefit from having their brands more aligned with their local communities than Wall Street in the current climate, as this ties well with the service nature of wealth management. Secondly, there are opportunities for crossovers with their small-business banking divisions.
Some analysts, such as Barclays Capital banking analyst Jason Goldberg, who spoke to CNBC this week, are predicting a better year for regional banks. It remains to be seen whether they will use this as a chance to grow their market share among high net worth clients in 2012.