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Navigating Change

Navigating the Changing Landscape of Family Wealth

In the ever-evolving world of family wealth management, firms face a multitude of challenges as they strive to provide exceptional services and cater to the diverse needs of ultra-high-net-worth clients. To gain a deeper understanding of these challenges and explore potential solutions, we sat down with Nikki Michelini, an industry veteran with over 20 years of experience in the family wealth space. 

Nikki specializes in providing holistic planning for ultra-affluent individuals and families, including entrepreneurs, executives, and family business owners. In addition to leading client service teams in providing objective and tailored advice, she has also served in various leadership roles, including co-leading a national Family Office team, spearheading wealth planning platform and deliverables development, facilitating firm integrations, and contributing to expanding growth through business development efforts.

This blog post delves into her insights on various topics, ranging from what families want from their advisors to the significance of client experiences, and the importance of work-life balance. So, let's dive in!

What Do Families Want?

We started our discussion with the most pressing question, what do families want, and how can a wealth advisory firm meet those needs?

According to Nikki, at the highest-level, families are looking for a firm that aligns with their values and offers bespoke services that meet their needs. It’s the concept of “like attracting like”. It can be challenging to match a firm with a family, because within one family there can be differences in terms of generational preferences. Some families will prioritize their need for diversity and inclusion, while others may want to focus on succession planning.

Nikki also acknowledges the importance of the human element, where families want a firm that can engage with them in a way that works for them– whether that means a focus on using technology or using traditional family meetings.

A major theme of our discussion was how the role of advisors has evolved beyond technical expertise. While technical competence remains crucial, successful advisors are those who can establish a personal connection with families, navigate complex family dynamics, and act as coaches. Effective communication, adaptability, and a deep understanding of individual family preferences are vital for advisors to provide holistic guidance.

How to Build the Relationships with the Next Generation

As the industry matures, the focus is shifting towards nurturing multigenerational relationships and ensuring seamless transitions between generations. This is essential, because 70–75% of the next generation will leave in favor of their own advisor- and take their assets with them. Historically the first or second generation of wealth creation establishes the relationship, but it’s rare that the lead client brings the next generation into the room.

To change this momentum, advisors need to start early with the second and third generation, especially if they were not involved in the process of choosing the firm.

To build loyalty with the next generation start by meeting with them early in the process. Also consider expanding your firm to include more diversity- ie. age, gender, backgrounds, geography, then the children can have the opportunity to connect with other advisors in the firm.

The next important step is making sure your service delivery is modified based on what the next generation wants and expects. The younger generation typically prefers to communicate via email or text, so it’s important for them to reach financial data, and communicate with their advisors through technology.

Let’s Talk Pricing

How family wealth firms charge has been a hot topic as of late and for good reason. We asked Nikki, as firms expand and grow into more of a holistic wealth advisor what should firms be thinking about when it comes to pricing? What are some of the issues with the traditional bps on AUM?

Nikki says that one of the challenges is that advisors want to provide excellent service, but don’t want to discuss charges whenever a need comes up. One option that can help is using a bifurcated approach, typically using a combination of basis points on assets under management, along with a fixed fee retainer model. This method includes more education for families, because it’s new and can be harder for families to see the value right away. Other firms have been successful with having a flat, all-in fee that doesn’t fluctuate from year to year. In this method, when there’s volatility or down markets, you can see less fluctuation in their revenues.

Problems and Challenges of Growth

As family offices expand their services offerings and grow their client base, they encounter a unique set of problems and challenges. Scaling services for ultra-high-net-worth individuals and families, which often demand complex and personalized solutions, can be particularly daunting. Nikki suggests that firms be intentional about how to deliver those services, whether that means outsourcing, or engaging specialty providers who offer tailored support for the family wealth space. By focusing on strategic partnerships, firms can successfully scale the unscalable.

Embracing Technology

Technology has long been a challenge in the family wealth industry, but it also presents immense opportunities. Firms are actively seeking innovative solutions to enhance their technological capabilities. By harnessing the power of fintech and leveraging advanced tools, firms can streamline operations, improve efficiency, and provide clients with real-time data and insights. Embracing technology also enables advisors to offer a more personalized and data-driven approach to wealth management.

Bill payment technology has been a hot topic lately, because it’s one of the “stickiest” services that can be provided for families. The volume of data, and insights derived from offering bill pay is helpful for advisors to understand the day-to-day happenings, for tax prep, and for creating powerful holistic reports. For younger individuals (20’s-30’s) technology can be especially helpful to serve up data and track it for them so the data is insightful, and they understand budgeting more clearly.

An established firm with procedures/infrastructure is a better solution than firms that only use a bookkeeper. It’s challenging for a client to know that there isn’t any fraudulent activity, when one person is responsible for all the bill payment. By separating duties, meaning the person entering the bills isn’t the same person approving the bills, you lower risk and increase your client’s confidence in the process.

A professional bill payment offering can really give clients the freedom they demand. Clients can be anywhere around the world, they can access everything digitally, and can, when needed, approve bills that meet the threshold that they’ve determined they need to see. 

Enhancing the Client Experience

Client Experience (CX) has emerged as a key focus for advisory firms. To provide exceptional CX, firms must consider several key aspects. First, they need to align their services with the specific needs and preferences of each family, delivering bespoke offerings that address their unique requirements. Next, firms must leverage technology to enhance accessibility, provide real-time data, and streamline communication. Finally, firms should emphasize transparent and comprehensive reporting, ensuring clients have a clear understanding of their financial situations at all times, from anywhere.

Despite the growing emphasis on CX, many firms still have blind spots that can hinder their ability to deliver outstanding service. For example, the failure to establish effective separation of duties, especially in bill pay processes. Clear procedures and infrastructure, coupled with diligent risk management, are essential to instill confidence in clients. Firms must also educate clients about bill pay procedures, explore ways to streamline the process, and prioritize security measures to combat fraudulent activities.

Embracing Work-Life Balance

In the pursuit of success, professionals often overlook the importance of work-life balance. During our discussion Nikki highlighted the significance of prioritizing self-care and finding a healthy equilibrium. By recognizing the need for personal well-being, individuals can bring their best selves to their work and ensure long-term sustainability and fulfillment in their careers.

The family wealth management industry is in a constant state of evolution, presenting firms with both challenges and opportunities. By embracing innovation, nurturing multigenerational relationships, leveraging technology, and prioritizing client experience, firms can navigate the changing landscape successfully. 

This article and the information contained herein is for general information and education only. It is provided as a courtesy to the clients and friends of AgilLink. AgilLink, as a matter of policy, does not give tax, accounting, regulatory or legal advice, and any information provided should not be construed as such. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations.  You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented, taking into account your own particular circumstances.

AgilLink is an RBC company and an affiliate of City National Bank Member FDIC. AgilLink is not owned by the Bank. 

City National Bank is a subsidiary of Royal Bank of Canada. Deposit products and services are provided by City National Bank.

Nikki is employed by Schwab, and independent company, and is not associated with AgilLink, City National Bank, or Royal Bank of Canada.