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Building Bridges Landscape, Comparisons & Implications
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
Three Take-a-Ways for Your Business
Competitive Landscape: Families & Firms
Fee Charging Alternatives
Outsourcing/Collaboration: Family Office Services
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
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
The Landscape is Changing Client Net Worth
Trust VFO
Ext. CIO
MFO
PTC
Ext. FO
CFO
SFO
JVO
Enh. FP Complexity Enhanced Virtual External MultiChief Financial Family Family Investment Planner Office Office Office
Joint Private External Closed Single Venture Trust Family Family Family Family Company Office Office Office Office
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
4
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.
5
Ten Family Office Services Services Most Offered
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
Services Least Offered
9. Family Meetings & Education 10. Strategic Philanthropy & Adm.
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
6
2009 MFO Study at a Glance
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
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
7
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
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
8
A Shift from Asset-Based Fees to an Annual Retainer Asset Based Fees
Hourly Rate
Percent of Net Worth
Annual Retainer
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
9
Operating Ratios for MFOs
Revenue per $ Assets (bps)
2008 60
%∆ -3.2
2007 62
Expense per $ Assets (bps)
57
35.7
42
13.1%
-42.3
22.7%
Profit Margin (%)
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
10
New Competitive Landscape 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
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
11
2009 SFO Study Interim Report
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
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
12
The View from 10,000 Feet
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
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
13
Top Challenges: SFOs & MFOs For the SFOs:
For the MFOs:
1. Gen./Family Relationships
Human Capital
2. Investments
Business Development
3. Human Capital
Managing Growth
4. Justifying Expenses/Budget
Technology, Client Reporting
5. Sustainability & Strategy
Marketplace Awareness
6. Financial/Generational Plan.
Profitability
7. Consolid. Reporting/Tech.
Managing Client Expectations
8. Liquidity & Cash Management
Economic Turmoil
9. Compliance, Tax and Legal
Invest. Client Portfolios
10. Managing Growth
Operational Efficiencies
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
14
Rising Expectations: What Clients are Asking For Now Of the MFOs:
Of the SFOs:
Advice on Private Equity
Aircraft Management
Trustee Services
Managing Newly Acquired Business
Advice on Job Search
Family Investment Partnership
Property-Casualty Risk Review
More Family Communication
Gold Investments
Estate Planning
Partnership Accounting
Foundation Management
Enhanced Tax Reporting
Family Education
Foundation Consulting Family Education Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
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Complementary Skills
Overall Strengths (S) & Achilles Heels (A) MFOs
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
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
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved.
16
Comparison of Scalability: I
Mean Size of Participating MFOs @ $3.8 Billion AUAs
Copyright © 2010 Family Wealth Alliance, LLC. All rights reserved .
Mean Size of Participating SFOs @ $450 Million AUAs
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Comparisons of Scalability: II … but Research Is Inconclusive that Scale Translates into Efficiencies Tier
Assets
MFO AUAs* Per Employee
SFO AUAs* Per Employee
I
>$5B
$182.6M
$100.2M+
II
$1B->$5B
94.1
83.4 - 100.2
III
$0.5B-
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