Why mainstream financial institutions can’t cater for the world’s richest

Almost every wealth management company, private banking institution and legal and tax advisory firm has attempted to capitalise on the Multi-Family Office market. Yet, almost none of these have the infrastructure, experience or dedicated services to cope with the complex, customised services that a purpose built MFO can offer. Even banks like JP Morgan are far wide of the mark with a card that is supposed to be aimed at the 1% of the 1%.

Debit and credit cards.
Debit and credit cards.

Traditionally, Deutsche Bank, Credit Suisse Private Banking and HSBC Private Banking Holdings didn’t promote their services in the Eastern Bloc but in the past decade, they have all opened offices in Russia to get a foothold in the very lucrative Private Client market.

An MFO must also have extensive experience of a broad range of comprehensive strategies which give them the flexibility to meet client needs. It’s essential that an MFO has in-house professionals with a deep knowledge of many technical cross-disciplines including risk management, tax, legal and investment. This team of experts must consistently perform at a high level and unity is critical in resolving complex client issues. The support of a strong back office team is also vital.

An MFO becomes an integral part of the client’s personal, family and financial life. It’s only when confidence and trust reaches a certain level that and MFO service really comes into its own. An MFO has to be seen less as a corporate entity and more as a reliable group of trusted friends. They are, after all, providing highly personalised services.

So, mainstream setups simply can’t offer this – despite their efforts. They don’t have the in-depth knowledge, the operational structures or the ability to develop the relationships required. Nor are they actually able to offer objective advice and source from a variety of providers; which is really what lies at the heart of the MFO consultancy offer. An MFO must be entirely client aligned.

A key issue for these firms is that they are not well versed on the socio-cultural specifics of their new target markets. Client history and an existing relationship are also key to success. It is extremely difficult to be a new player in this area. These are the reason why wealth management companies and private banks often fail.

Although many financial institutions are clamoring to strike while the iron is hot, those who enter this market are ill-equipped and will most likely fail.


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