Multi-family offices (MFOs) and wirehouses are the most efficient when adapting to high-net-worth (HNW) trends, according to new research from global analytics firm Cerulli Associates.
“In recent years, the marketplace has rapidly evolved to keep up with developing client needs,” states Donnie Ethier, associate director at Cerulli. “Realizing that effectively advising HNW and UHNW investors requires a long list of complementary services has propelled some wealth managers, especially multi-family offices (MFOs) and many wirehouse advisory teams, to elite status, while other one-time market leaders are left somewhat disoriented and struggling to keep up. Respectfully so, other firms determined that their expertise and resources are best suited for less wealthy investors.”
“The industry-wide leaders by assets, the wirehouses, have generally acclimated; however, MFOs will continue to advance and threaten longtime grasps of HNW and UHNW families,” Ethier explains. “The wirehouses have encouraged the majority of their advisory teams to focus on clients possessing a minimum of $250,000, which has resulted in advisor productivity that is unrivaled by their largest scalable competitors, the banks. Many private banks continue to set asset minimums at $2 million to $10 million, with family-office services beginning at $25 million to $100 million; still, even these elite global brands are battling larger trends.”
Cerulli appreciates that MFOs may never overthrow the wirehouses’ and banks’ rule over the broad HNW market, but the past and future gains will certainly shift marketshare. And, if the traditional leaders do not adapt to larger consumer and advisor trends, it is possible that Cerulli’s projections that favor growth of MFOs could actually prove conservative.
“Providing asset management searches, selections, and asset allocation are, for all intents and purposes, no longer the greatest competitive advantage in the HNW and UHNW marketplaces,” continues Ethier. “Cerulli sincerely believes that, as a channel, MFOs have not only adapted the best, but that they have also moved well ahead of their primary competitors–including the wirehouses–in many key aspects.”