Fwd: Steve: 5 important trends changing the way ultra-wealthy & private investors allocate

On Oct 19, 2018, at 8:16 AM, Richard Wilson <clients@familyoffices.com> wrote:

Hi Steve, pulling insights from meeting with 1,000+ single family offices, having over 1,700 family office speakers on stage at our events over the last 11 years, and helping dozens setup and operate their single family offices, here are 5 trends that are changing how private investors and especially the ultra-wealthy families worth $100M+ are allocating their capital:

1. Centimillionaires:  While the mass affluent and billionaires are studied and talked about relentlessly in the media and by the general public, there are very few resources or facts available on those who are worth $100M up to $1B. These individuals are called centimillionaires and that term is rarely used by anyone, today at least.  This was similar to the use of the term "family office" in 2000-2008, and I think in the future the mass media, wealth managers, and dozens of other types such as industry service providers are going to sit up straight and realize that while there are only around 3,000 billionaires depending on what sources you trust, there are between 40,000 and 60,000 centimillionaires. The families worth $100M-$1B need a lot of help, do not have as many gatekeepers as billionaires, and are less "famous" so they aren't being pinged 400 times a day with pitches/inquiries.  Peter Theil in his book 0-1 talks about how you can predict the future if you can find something you are high conviction on and yet nobody else seems to believe it or see it coming.  This area of adding real value and resources and peer connections to centimillionaires is one of those areas where those positioning now, building relationships now, and adding value now will do well long-term just as they will in the growing family office space.  This is something we are focusing on with our live events, having more single family offices at the $100M+ net worth level on stage and this is why we have been prepping to release our next book "Centimillionaire Migraines" and why 80-90% of our efforts in helping setup single family offices for clients and help run them is with $100M-$1B net worth clients.  
2. Transferring of Values (Not Capital): While the general public talks about baby boomers and the transfer of that wealth being central to their aging, families I engage with worry most about values, responsibilities, family stories, and know-how being passed on to the next few generations.  Transferring of wealth in a tax efficient matter is important, but not much of that matters if the family tears themselves apart, wastes the money, embarrasses the family name, and squanders what past generations worked so hard to build as a family culture and legacy.  Many families are afraid that their family stories, governance structures, experience, etc. in creating the wealth is going to get lost between generations, and the true loss is either the family staying connected and/or the principles that lead to the wealth being created in the first place.  The wealth is truly transferred within the family values - not just a "warm fuzzy family emotions are more important than money" approach, but truly the only preservation and growth of the capital long-term is via the values/mission of the family.
3. 3 Buckets: In a world where you can text virtual assistants to book your Soul Cycle class for you, or have 6 full-time team members in the Philipines virtually managing your back office more family offices are realizing that the only thing they should be doing in-house is what they did to create their wealth in the first place, the space where they believe there is great cross-over in a rising tide opportunity, their experience/DNA/skills, and where they actively want to be 100% focused.  Many single family offices, whether they hire a private bank or multi-family office or not, are leaning towards full outsourcing of their managers/stock/bonds/market exposure, a full in-house deployment of their investment back into the 1-2 niches where they are playing offense, and then an in-between strategy of going through independent sponsors and some direct investments when it comes to CRE allocations.  I see this trend of managing these three buckets with three varying levels of control/transparency/outsourcing and strategic insight only increasing and most common with $100M-$2B in assets and I just recorded a note on this for our Family Office Podcast yesterday.
4. Virtual Family Offices: The mass affluent, my entire family, and the majority of ultra-wealthy still have no idea what a family office is.  I had dinner with a billionaire in NYC recently who had never heard of a family office before.  The space is growing though, and it is far ahead of where it was in 2001 when I first started working with investors or in 2006 when I first started meeting with family offices. In another decade it will be so common that there will be a lot of demand from those worth $20M-$100M to have fully virtual family office solutions put together.  Their needs will be unique from the $100m+ net worth centimillionaires who may also have lean single family offices but more of a cushion in place financially to be placing long-term investments into operating businesses.  
5. Accountability: Family members in their late 30's and 40's are starting to manage divisions of family offices, assets, and portfolios.  This new generation of family office managers is leading to more demands for transparency and accountability, whether it is transparency in what management fees are being spent on, accountability in not paying high fees for average performance, or incorporation of being socially accountable while selecting where they allocate and through what structures and impact screens.

If you are working on starting your family office, looking to work more with the ultra-wealthy please reply here and my team and I will do our best to be a genuine resource to you. 

I hope you found this helpful.  If you would like to access different types of free video content and resources please check out the 100+ free resources on our blog here: http://FamilyOffices.com/Blog

Richard C. Wilson

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