Automation may be taking over much of the business world, but in the upper reaches of the financial services sector, the human touch still holds considerable value. Now, the personalization and quality of services that were once reserved for the super wealthy are being made available to less wealthy people.

The family office is the uber specialized financial service model used by the top one percent. If you have a billion dollars that you need to protect and grow, you will pay a team of financial experts whose sole mission is to manage your assets. But times are changing and the family office is converging with hybrid structures to reach a wider range of successful individuals.

That change is being spurred along by the rapid influx of new millionaires in America, over 400,000 in 2016. By 2021, an estimated 18 million Americans will be worth seven figures or more. Those individuals need more than robo advisors to manage their finances, but are still far out of reach of being able to afford a family office. Entrepreneurs are scrambling to service that need.

The family office evolution

Family offices are being democratized. Until recently, the family office was traditionally a small, non-bank entity that handled the finances for one super rich client. Entrepreneurs have begun to step into this space by creating entities that allow individual CPAs and financial advisors to augment their services and recreate the family office experience at lower levels. This enables them to service high-net-worth individuals who are looking for the personal attention found in a family office, but who cannot afford the luxury services of the ultra-wealthy.

"The traditional family office model can be retooled to make it more accessible to more people," explains David Miller, founder and CEO of PeachCap. "By centralizing back office support and empowering CPAs and financial advisors with the tools they need to manage more complex tax, accounting, and wealth management strategies, top shelf financial and tax services become available to more people."

The democratization of the family office to make it available to these newly-minted millionaires is an essential response to the growing population of wealthy Americans.

Multi-family office and other models

Traditionally, the family office has been a single-family office, managing the finances and assets of one client. Assuming that one client is a billionaire-esque business mogul of some sort, those assets would be complex and complicated enough to absorb all the energy of that office. Investing and managing said business mogul's estate would be a full-time job.

But part of what has made the democratization of the family office possible is the multi-family office, which serves several clients at once. They are lower end clients, with hundreds of millions rather than billions, but their combined assets allow multi-family offices to provide them with personalized, affordable service in the family office style.

Continuing that trend to include individuals in the tens of millions wealth bracket opens up a variety of business model options. The key is to centralize back office operations, so that a CPA with a wealthy client can also provide tax services and partner in larger investment schemes, without needing to hire in-house.

"Wealthy clients expect a broad range of services in one place, and they expect them to be executed in a single, cohesive strategy," says Miller. "The financial industry's response to the growing population of wealthy individuals should be to increase the availability of quality services, not force clients to choose between quality and affordability."

2021 Projection

These developments are coinciding with the departure of private banks from managing low level millionaires. JP Morgan Chase's private bank recently announced that it was raising its minimum level asset class from $5 million to $10 million. That trend is being seen across the board as banks simply cannot handle the volume of new "single digit" millionaires.

Even if you do meet the minimum threshold required, you are now the least valuable client at your private bank, which is less than reassuring. That is making the rise of startup solutions in the boutique, neo-family office space so valuable. Returning to the projection that there will be 18 million people with a million dollars or more by 2021, we can also project that there will be a slew of new, non-bank financial services that step up to fill the gap.

Financial journalist Suzanne McGee put it best when she wrote, "As it is, if I were a single-digit millionaire tossed out of the "paradise" of private banking, I'd walk away from that bank altogether. They don't want me? Heck, I don't want them either. There are plenty of independent financial advisers out there who - unlike the banks - aren't intent on making more money flogging their own proprietary investment products."

Financial services at the highest levels are in shakeup mode, which is a good thing if you are a millionaire or an entrepreneur in the wealth management space.

Published on: May 17, 2017