Solving the Succession Planning Problem and The Alliance 2012 MFO Strategic Marketing Results

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1 Solving the Succession Planning Problem and The Alliance 2012 MFO Strategic Marketing Results 1

2 Presenters Richard J. Flynn Principal-in-charge, Family Office Group, Rothstein Kass Robert Casey Director of Research, The Family Wealth Alliance Moderator Kathleen M. McBride Director, The Family Wealth Alliance 2

3 Solving the Succession Planning Problem Presented by Richard J. Flynn Principal-in-Charge, Family Office Group, Rothstein Kass June 2013

Navigating Transitions in Family Office Leadership Succession planning is difficult for any organization Especially challenging for family

4 Navigating Transitions in Family Office Leadership Succession planning is difficult for any organization Especially challenging for family offices Leadership transition is #1 challenge* 62% of executives have no succession plan in place* *Source: The Family Wealth Alliance SFO 2012 study

5 Pitfall Emotion as a Planning Obstacle Challenge Mortality Egos Giving up control Best Practices Inclusion (of family members) Make decision-making a collaborative process

6 Pitfall No Next-Gen Leader Challenge Identifying someone willing, able and ready to lead If no one is identified, the family will need to train next leader Best Practices Don t wait until the succession planning process to judge the ability of next-gen leader Train next-gen leaders at a young age - Fund a small business Place them in a family foundation

Pitfall Overlooking the Opportunity to Evolve the Mission Challenge Lack of mission statement Overlooking the mission conversation Not evolving/updating the current mission

7 Pitfall Overlooking the Opportunity to Evolve the Mission Challenge Lack of mission statement Overlooking the mission conversation Not evolving/updating the current mission statement Best Practices Make the mission discussion a formal part of succession planning Create (or re-create) strong, actionable mission statement Align the mission with tangible goals

An Often Overlooked Element of Succession Planning Planning for transition of key employees and advisors Best Practices Assess the scope of services Begin a

8 An Often Overlooked Element of Succession Planning Planning for transition of key employees and advisors Best Practices Assess the scope of services Begin a dialogue with current advisor(s) Solicit advice and referrals - Use outside sources and trusted colleagues Run on parallel tracks - Avoid an abrupt transition

9 Thank You & Questions? Contact: Rick Flynn Principal-in-Charge, Family Office Group

10 2012 MFO Strategic Marketing Results ALLIANCE RESEARCH SPECIAL REPORT

11 Focus on Strategic Marketing Getting Serious About Business Development 11

12 Alliance Research 9th Annual MFO Study: Findings Firms Frustrated with Constraints on Growth Not Satisfied with Business Development Efforts Two-Tier Offerings Gaining Traction Ties with SFOs Continue to Expand View of Competitive Position Increasingly Positive 12

13 Our advisors are operating at full capacity and do not have as much time to do business development. --MFO Study Participant 13

14 We do not have business development officers, which is a part of our culture, and we like it that way. But it also presents growth challenges. --MFO Study Participant 14

15 Business Development: The Top Challenges I Relative Score 1. Market Differentiation Managing BD Function Finding, Closing Clients Staff Capacity Brand Recognition Quality of BD Staff 37 15

16 Growth with No Constraints Annualized 3-Yr. Growth As Now Expected Growth Without Constraints Total Revenues 17.0% 28.4% Assets Advised Asset-Based Fees Non Asset-Based Fees

17 Top Growth Constraints I Relative Score Human capital, recruiting 2. Lack of scale, efficiency, process Inadequate organizational resources Poor business development function Low brand/marketplace awareness 31 17

18 What s Working Better 1. Value Perceived by Clients 2. Approach to Pricing 3. Revenue per Client 4. Perceived Position in Market 18

19 Relationship Managers Handling Business Development Duties 80% 70% 60% % % 30% 20% 10% 0%

A Hiring Spree %Δ 2011-2012 Business Development Officers 22.

20 A Hiring Spree %Δ Business Development Officers 22.9% Client Relationship Managers 4.3 Total Employee Headcount

21 Asset Based Fees What Percentage of Your Revenue Comes From Asset-Based Fees? Mean % 71% 77% 77% 75% What Is Ideal Percentage? Mean for 2012: 80% 21

22 Other Fee Sources Does Your Firm Charge a Setup or On-Boarding Fee to New Clients? 2012 Yes % 13.7% 9.0% Minimum Annual Fee for Existing Clients? Yes 37.0% 22

23 Use of Value-Based Pricing Does Your Firm Use Value-Based Pricing in Setting Client Fees? Yes 19.6% "Our fees are customized for each client based on the value, both financial and otherwise, we expect our advice to bring in each individual situation. --MFO Study Participant 23

24 Two-Tier Offerings I Tier I Higher Fees, Customized Pricing Full Menu of Integrated Services Tier II Pricing More Standardized Services Tend to Be Investment Only Approaches Vary Widely from Firm to Firm MFOs Today Are Adding the Lower Tier Firms New to Space Adding Upper Tier 24

25 Two-Tier Offerings II Does Your Firm Have a Two-Tier Offering? Yes 34.8% Yes by Segment $5B+ $1B-$5B 25.0% 58.8 $0.5B-$1B 22.2 <$0.5B

26 Two-Tier Offerings III Are the Two Tiers Branded Differently? Yes 28.6% What Percent of Assets, Clients in Each? Tier 1 Assets 78.4% Tier Clients 50.5%

Two-Tier Offerings IV Motivations: Build Scale and Leverage Investment Expertise Simpler Solution for Less Complex Families Accommodation for Client

27 Two-Tier Offerings IV Motivations: Build Scale and Leverage Investment Expertise Simpler Solution for Less Complex Families Accommodation for Client Relatives, Friends To Manage Client Experience and Profitability To Improve Efficiencies with Smaller Clients Capture Scale and Profitability of Tier 27

28 Growth in Services to SFOs Do You Provide Services to SFOs? 70% 60% % 40% % 20% 10% 0%

29 Growth in Services to SFOs Describe Services Provided: Investment Financial, Trustee Consulting/External CIO Tax, Estate Planning Services and Trust Monitoring Accounting, Bill Payment, Treasury Consolidated Family Reporting Governance Consulting 29

30 When You Lose Business Some Clients Want to Work with Bigger Firm Don t Understand Multifamily Office Model Fee Is Higher than What Other Firms Charge Values Investments over Wealth Management The Result of Being Perceived as Too Small Client Wants Hand-On Investment Role 30

31 Effective Winning Strategies Speaking Engagements and Publicity Select, Small Events for Prospect Families Innovative Educational Programs Expanding Network for Third-Party Referrals Asking Existing Clients for Referrals Events Co-Sponsored with Luxury Brands Disciplined, Relentless Networking 31

32 2012 MFO Strategic Marketing Results ALLIANCE RESEARCH SPECIAL REPORT

33 Presenters Richard J. Flynn Principal-in-charge, Family Office Group, Rothstein Kass Robert Casey Director of Research, The Family Wealth Alliance Moderator Kathleen M. McBride Director, The Family Wealth Alliance 33

34 Thank You! A recorded version of this webinar will be available at and Rothstein Kass whitepaper will be made available at and 34

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