Business Models Serving UHNW Families: Who Delivers A Full Balance Sheet?

Guest Article Series: Business Models Serving UHNW Families Today – Is Anyone Delivering the Full Balance Sheet?

Ultra-High-Net-Worth (UHNW) families have broad needs and complex lives that often include multiple generations, legal entities, family businesses, family offices, family foundations and multiple residences scattered across the globe. These families are seeking holistic advice and the integration of a comprehensive set of financial and non-financial services to address their needs and simplify their lives. Unfortunately, they are confused and don’t know where to turn.

At the upcoming FWR Family Office Summit in New York City, we will be examining specific wealth strategies that families and family offices can deploy to ensure their financial and emotional well being, in the fullest sense and across generations. Additionally, and as part of an ongoing series of articles, our concluding panel of thought leaders will have a frank discussion on the various Wealth Management business models available to the UHNW, as they seek to fulfill their needs, as well as the challenges that these models face today.

The Client Need

As many of you know, the adage “shirtsleeves to shirtsleeves in 3 generations” is still a harsh reality for many UHNW families today. Even the most well-crafted estate plan is useless if it fails to address a family’s qualitative goals, and if their heirs are unprepared to receive and manage their inheritance successfully.

  • 70% failure rate in the transfers of wealth from one generation to the next

  • Only 30% of family businesses survive through the second generation

  • Only 13% of family businesses survive through the third generation.” * * Family Wealth Alliance July 2018

UHNW families need strategic family enterprise planning and wealth management professionals that proactively utilize an integrated multi-generational approach to set them up for success in the future. The planning needs to seamlessly integrate not only quantitative financial services such as tax, estate, financial, investment and insurance planning, but also the qualitative (non-financial) advisory services such as family dynamics, governance, education and philanthropy.

The Challenges We Face

For a number of reasons, most, if not all, of the wealth management business models out there today are falling short when it comes to helping families sustain their wealth for multiple generations. These models include Private Banks, Wealth Manager/RIAs, External CIO/RIAs, Trust Companies, Broker Dealers, Accounting & Family Office Service Providers and Single-Family Offices.

The challenges and issues that affect them include: the regulatory environment, being a public vs. a private company, their governance or ownership structure, consolidation, the lack of a continuity/succession plan, available capital, the cost of talent and fee compression (to name a few) have significantly impacted the ability of each business model listed above to deliver the value needed to families in the short term, which in turn impacts the sustainability of their family enterprise for the long term.

The Bright Future

We are excited to explore each of these business models in more depth with you in the coming months through a series of articles and in conversation with some of the most prominent industry experts in this field at the upcoming FWR Family Office Summit on November 1st.

Our goal is to support families and family offices in their understanding of what each business model can realistically provide for them today, how to strategically address the issues they uncover in these models and where we see the industry going, in hopes of preparing them for what is to come in the future.