Putting a family office in reach of so-so rich

Financial planner Peter Wheeler thinks he’s got an angle on the financial services firm of the future – a virtual network of lawyers, accountants and advisers connected through the Internet.

At least one expert sees the network evolving into a general contractor/vendor type of arrangement like the kind found in the construction industry.

“In many ways, my competitors can also be my allies,” says Mr. Wheeler, managing director of the Family Office Network LLC.

“I have an expertise in stock options, but some other adviser down the street may have an expertise in family-succession planning,” he says.

value add

The idea is to create a central, online data base of client accounts that each professional can access as would be the case in a true full-service family office.

Instead of sending a client down the street for accounting services, an adviser can tap one of the professionals on the network.

“There’s no reason for an accountant to send a client off to his adviser to get details on gains and losses in his portfolio at the end of the year,” he says.

The network serves as both a referral service for advisers and a way to provide added value – convenience – for clients. Financial advisers, lawyers, insurance agents and accountants can work together while maintaining their independence.

fueling a trend

With those incentives in mind, Mr. Wheeler thinks both professionals and clients will pay to be on the network.

The new San Diego-based enterprise, which was in development for three years and has been up and running for about three weeks, aims to establish networks regionally.

Mr. Wheeler, who oversees more than $100 million at Wheeler/Frost Associates in San Diego, says the “online family office” model is targeted at families with at least $2 million in investible assets.

While the idea of consolidating various advisory components under one roof to offer clients a one-stop shop is not unique, it is unique to leverage that kind of cooperation by linking the various professionals electronically.

The Family Office Network design also fuels a trend toward bringing down-market those kinds of services – traditionally reserved for families with at least $20 million worth of investible assets.

For professional advisers, who are charged a minimum of $1,000 per year to participate, the online family office can also act as a referral network.

Peter Lucier, an adviser with Strategic Management in Temecula, Calif., calls the Family Office Network “the only alternative to going out and piecing something together yourself.”

Mr. Lucier, whose firm specializes in offering investment management services through accounting firms, says the online family office model could help him market his services to a wider network of accounting firms.

“We’re in the final stages of evaluating it,” he says. “We think it’s a viable program that would work for us.”

Mary Jane Fredrickson, managing director of the Family Office Exchange in Washington, D.C., an international association for families and the professionals who manage their wealth, says a dramatic increase in the number of millionaires over the past decade has increased the demand for family-office-type services.

“Ten years ago, one could say the popularity of family offices was driven by tremendous wealth creation and the need on the part of the client to find that one resource for interdisciplinary services,” she says. “But now, I think people are becoming aware, because of increased education and more publicity, that there are alternatives to having to do it all yourself.”

At the same time that clients are demanding the more holistic and higher-touch services that are associated with family-office structures, the adviser community is realizing a need to collaborate in order to stay competitive.

Not to be confused with efforts by some financial planning firms to bring together multiple independent financial advisers to build a branded network of offices, the online family-office structure is more akin to outsourcing to meet specific needs.

Mark Hurley, chairman and CEO of Undiscovered Managers LLC in Dallas, compares the online networking structure with the way large accounting firms outsource mundane tasks such as processing their clients’ tax returns.

“Most of the preparation of tax returns by the Big Five accounting firms is sent off to be done in Bangalore, India,” he says. “Preparing those taxes is just not a cost-effective use of their time.”

In other words, a small financial planning firm can spend the time and effort learning about estate tax issues for a particular client, or the adviser can outsource the work to a specialist.

Mr. Hurley, who has published a number of reports on the future of the financial planning industry, calls the online family-office model “the first step, but not the logical conclusion” for the industry.

While Mr. Wheeler’s model puts the adviser with the primary client relationship at the hub of the clients’ professional relationships, the pricing is still primarily separate. The future, according to Mr. Hurley, will include one price being charged by the “general contractor.”

“Eventually, we will see bundled pricing,” he says. “One guy will be the general contractor, and the rest will be vendors.”