I meet with a lot of wealth managers, both as part of a due diligence process, Investment Committee work or as a referral.
For the corporate or bank aligned, the advice offering tends to be as part of a scaled, larger organisational structure. This can take the form of a Private Bank (GS, HSBC, JP Morgan) that of a traditional wealth manager corporate structure (Morgan Stanley, Koda, Crestone) or ones with a more boutique stance (Lipman & Burgon, GGB Wealthcare, Omnia Capital Partners).
There is also an emerging advice business that is creating a separate advice offering for Family Offices whilst maintaining a mass affluent/HNW offering at the same time. This can mean a separate brand that aims to create a more customised solution that can only be viable with larger assets size.
Where we see successful SFO/advice is in the boutique space that is looking to retain a small cohort of clients and outsource costly infrastructure and risk (custody, trading reporting) to their banking, platform, or trading relationships.
However, there is a growing advice officering that is forging a less traditional route and providing an alternative. Often established by a small group or individual with family office, investment or global wealth management experience they are seen more as a trusted adviser than external supplier. There is less appetite for building a large client base, the focus is on a small amount of very customised relationships.
Boutique Investment and Implementation Consultants
Most have little to no corporate infrastructure. Their main role is to assist investment teams within the office to formulate an investment plan or policy and then implement.
There are also some that provide IC committee work, trustee or risk and governance advice.
They are not wealth managers in that they aren’t only looking for FUM/FUA, they can farm out aspects of the advice chain that are not revenue generating or are higher risk (manager selection, trading, custody services) to global banks.
Intermediated vs Self Service
In the boutique advice space, the use of several external managers to provide research, ideation and portfolio construction is more prevalent as they are not relying on a single counterparty or investment adviser.
One such firm uses a different wealth manager for different asset classes or solutions – alternative, equities execution, custody, manager research etc. This “best of breed” mentality is often utilised by those that have significant assets across a small number of clients.
Family Office Adviser: “We see the family offices in two ways – sub $100M and they will be outsourced almost completely to a wealth manager and must take their investment menu. Over $200M and family office can set their own menu. We can see the use of consultants for the $200M client for implementation, costs, and price impact analysis but we would not recommend them if they cut the lunch of our partners such as Private Banks.
SFO: “We don’t want to interact with a large team, nor do we believe we need to. We are more comfortable using proven, recommended person and utilize consultants for that reason.”
Family Office Adviser: “There is value in institutional level due diligence of funds, SAA, and deep dive analytics but families view it as a nice to have, not something that is imperative for them to manage portfolios. “
Where’s the Demand
Often, this service provider is not an outsourced CIO structure and the executive decision on actual investments remains within the family office. However, there is a need for external advisers that can assist with:
Capital market assumptions and managing to an aggregate return and risk profile.
Execution and implementation – from manager selection, trading
Monitoring and reporting infrastructure
Risk tolerance and management
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