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Too rich? Hire a chief wealth adviser

Scott Mcculloch is editor of Families in Business.

A growing number of super wealthy US families and a decline in service at the banks that once catered to them have sparked an explosion in multi-family offices, according to a survey by Bloomberg and Family Office Management.
The report, published in Bloomberg Wealth Manager magazine, claims to be the first comprehensive study of one of the fastest-growing segments of financial planning. It looks at 64 of today's US industry leaders to gain an understanding of their origins, business strategies and service delivery models.

As the economic boom of the past decade swelled the ranks of the super wealthy, multi-family offices emerged as a more profitable and personal alternative, the report said.

"Multi-family offices, which offer sophisticated financial management and a broad menu of high-tech services, found themselves ideally positioned to grab the banks' business," said author and Bloomberg Wealth Manager executive editor Kieran Beer. "The result has been a burst of growth over the past five years."

Although the average firm only began offering multi-family services in 1994, they boast impressive results. Aggregate assets under management top $169bn, up 17% from last year and, collectively, firms serve 5,996 multi-generational client families, up 9% from 2002.
Multi-generational client families make up the vast majority of the firms' total assets. The study also revealed that New York and Pennsylvania dominate the list of where firms are located.
Firms see recruiting, developing and retaining professional staff as their biggest challenge, followed by managing growth and building awareness of the business model. The majority are registered investment advisers, while 20% are banks or trust companies. The remaining are accountancies, law firms and other closely held businesses.

Bloomberg's report follows hot on the heels of a similar study by Northern Trust, a wealth advisory firm. Northern Trust's study concluded that affluent US households now want their assets managed by a 'chief wealth adviser' – somebody to oversee all of their financial and investment strategies. Northern Trust undertook the survey last year and questioned 4,000 affluent client households which typically have assets of more than $1m to invest. The survey found that about half said it was important that their adviser provide access to third party investment managers. Such access allows wealthy investors to choose from many investments and investment managers tailored to their financial goals and income, instead of being limited to one firm's proprietary investment products.

"Wealthy individuals and families want a broad selection of asset classes – stocks, bonds, even hedge funds and private equity, and where appropriate and cost-effective, access to securities managed by third parties – to obtain better portfolio performance and alignment with their financial goals," said Northern Trust's William Morrison. "They also want the security of knowing that their assets are protected and accounted for, that the performance of individual investments and investment managers is being tracked and measured, and that reports for their entire financial plan are consolidated, simplified and online, available for review at any time."

In other words, the super wealthy want to stay that way.

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