09/12/2014 10:13 am ET Updated Dec 06, 2017

Family Offices 101: How to Catch a Billionaire Client

Family offices and big banks are both chasing after the fortunes of ultra-high net worth individuals (UHNWI), a growing global population. The Knight Frank's annual Wealth Report projects that by 2023, the number of billionaires will rise by 38 percent and the number of UHNWIs by 59 percent.

Where does their money come from? Aside from family fortunes handed down to future generations, there are billions flowing from media, entertainment, professional sports, and technology. These industries regularly breed instant billionaires. Likewise, new economic growth regions in Asia, the Pacific and Latin America have opened up opportunities that create new fortunes.


Wealth management used to be the exclusive territory of family offices, who geared their small, personalized staff services around ultra-high net worth individuals or rich families. Many of their clients chose to avoid the fee-oriented structure of big banking even prior to the sense of betrayal and disappointment after the 2008-2009 recession. Big banks have responded by creating small business units affiliated with larger financial houses to offer specialized service to the wealthy and their families.

Securing an UHNWI or wealthy family can require significant effort and cost, but both traditional family offices and big banks are committing serious resources to the chase.

One reason for their focus is that wealthy individuals and families are ideal for investment capital. Adding a single billionaire to a client list can be more productive than a multitude of small investments from banks and financial houses. The wealthy generally have a higher ratio of assets to debt, and fewer qualms about committing significant resources to a single important project. It can also be easier to manage a single individual or small family than a large corporate board or a half million shareholders.

The same holds true even for big banks, who have begun to target the newly rich in particular. Even large institutions can earn more profit serving one serving one billionaire than a thousand customers.

How do family offices, with significantly fewer resources, compete with massive banks? For starters, they offer more than just investment advice. Family offices are very adept at understanding the needs and personal preferences of the super rich and their families. They understand the individual circumstances and personal history that made their clients into the powerful people they are today.

Personal and social issues have a significant effect on the financial decisions of the ultra-rich and their families. The U.S. Trust survey revealed many of these issues, all of which complicate the business of wealth management.

There are several important findings from this survey, which family offices or big bank boutiques can use to their advantage in the pursuit of billionaire clients:

Changing family structures

According to the U.S. Trust survey, forty-six percent of the wealthy families experience a major change such as divorce, loss of spouse or partner, remarriage or the blending of families. So for the newly rich, structuring services and investments with these common occurrences in mind is very important.

Older generations of the wealthy are more conservative and tend to preserve marital relationships. To retain or gain their business, service packages should address this value as part of building long-term trust in order to foster a fruitful relationship.

Multi-generational and extended family circumstances

Fifty-six percent of wealthy respondents in the 18-33 age group indicated they belong to the second or third generation of a rich family. Almost half of them have already received their inheritance, making them young, rich and inexperienced. Their parents agree. However, 96 percent of wealthy parents in the survey believe that their children are not mature enough to handle family money until they reach age 25.

Evolving gender role

Women are now playing active roles in wealth planning and decision-making, in part because they make significant contributions to family wealth.

Fifty-two percent of women in the U.S. Trust survey enter into marriage or a relationship with equal or more funds than their spouses or partners. Moreover, 33 percent of these women are now either the major breadwinner or share equally in contributing to the household's wealth. This makes them equally important in financial decisions, and their wealth management services should reflect their status.

Generational views of investing and use of wealth

Affluent families in the survey indicated they felt a duty to put their wealth to good use; that is - to use it to make positive and real social change. After taking care of their families, the next most important thing they wanted to do was to give back to society. That's a laudable goal that should also factor highly into the kinds of investments and projects presented to the wealthy.

As these factors in the U.S Trust survey of ultra-high net worth individuals and their families show, there is more to the wealth management of billionaires than dollars and cents. Family and social values play an important role in any successful relationship with these kinds of clients. Any successful practice catering to or pursuing this demographic should keep them in mind.