Is the Multi-Family Office Pricing Model Broken?

Date: Jul 20 2016

David Toth

Pricing at multi-family office firms is under pressure.

That is one of the key findings in the 2016 FOX Wealth Advisor Benchmarking Study. Advisors are losing pricing power with their family client prospects, and have been for several years—there has been a 15% drop in the pricing of wealth management-related services for ultra-high net worth clients since 2012.

The question now, of course, is why?

To figure this out, we asked a number of leading advisors at both our annual FOX MFO Council meeting, and at the spring gathering of our FOX Integrated Wealth Advisor Council.

The problem for advisors is finding compelling, engaging ways to convey the value they provide to their prospects and clients. Only one-third of participants in our Wealth Advisor Benchmarking Survey said they feel that their family clients understand the value of what they are providing, including “softer services” such as planning, advice and education.

The One Factor Every Advisor-Client Relationship Comes Down To>>

Most revenue in 2015 came from asset-based fees, multi-family offices said. Firms continue to use alternative pricing methods to address varied and complex client needs—education services, trust services and reporting services among them—but expanded use of these additional pricing methods has not yet yielded proportionately higher revenues. However, it is worth noting that 67% of firms in our survey said they are neutral or disagree with the idea that their pricing structure is optimized, so it’s still very much a work-in-progress.

One might naturally expect that the decline in pricing would also lead to a decline in profits at wealth advisor firms servicing the ultra-wealthy market. In fact, members of FOX Advisor Councils reported that their profits and profit margins are holding by running their businesses more effectively and efficiently. The insights members have acquired from their FOX membership has helped them make better decisions and translated into best practices at their firms.