They call it “money camp.” Twice a week, 6- to 11-year-old scions of wealthy families take classes on being rich. They compete to corner commodities markets in Pit, the raucous Parker Brothers card game, and take part in a workshop called “business in a box,” examining products that aren’t obvious gold mines, such as the packaging on Apple Inc.’s iPhone rather than the phone itself.
It’s all part of managing money for the wealthiest families, says Katherine Lintz, founder of Clayton, Missouri-based Financial Management Partners, which runs the camp for the children of clients. Supplying the families with good stock picks and a wily tax strategy isn’t enough anymore. These days, it’s about applying the human touch, she says.
Lintz, 58, is on to something. Her 22-year-old firm was No. 2 among the fastest-growing multifamily offices in the second annual Bloomberg Markets ranking of companies that manage affairs for dynastic clans. The assets that FMP supervises grew 30 percent to $2.6 billion as of Dec. 31, just behind Signature, a Norfolk, Virginia-based family office that expanded 36 percent in 2011 to $3.6 billion.
In sheer size, the family office units of banks dominate the Bloomberg Markets ranking. Nine of the top 10 are associated with banks. HSBC Private Wealth Solutions, a unit of London-based HSBC Holdings Plc, is No. 1 by total assets under advisement for the second consecutive year, with $123.6 billion as of Dec. 31, an increase of 21 percent over 2010.
No. 2 on the list is Northern Trust Corp., based in Chicago, with $90 billion, while No. 3 is BNY Mellon Wealth Management, a unit of Bank of New York Mellon Corp., with $64.5 billion.
One area where the banks are expanding is Asia. The number of millionaires there rose 1.6 percent to 3.37 million last year, surpassing North America, which had 3.35 million, for the first time ever, according to a report by Capgemini and RBC Wealth Management.
In Hong Kong, Zurich-based UBS’s Global Family Office has dedicated the 48th floor of Two International Finance Centre to its “ultra” clients, those with at least $50 million in assets, says Amy Lo, head of UBS’s ultra-high-net-worth unit in Asia. There, clients can meet with a fixed-income or equity specialist or talk with an investment banker about an opportunity to buy into a company preparing to do an initial public offering, Lo says.
It’s easier to grow when you’re small. Even so, of the top 10 fastest-growing firms in the ranking, only one — HSBC Private Wealth Solutions — was part of a big bank. The other nine were boutiques such as FMP — small companies that are often willing to accept thinner profit margins to mind money, prepare taxes, pay bills and arrange the purchase of private-jet shares for the ultrawealthy.
“We’re getting so good at providing things that people didn’t know they wanted,” Lintz says.
She was a financial planner at Chase Manhattan Bank, now part of JPMorgan Chase & Co., before moving to a sports agency called Bry & Associates, where her clients included professional football and baseball players. Many of them stuck with her when she started her own firm in 1990.
Lintz kicked off her money camp three years ago. She hired a retired math teacher to design the curriculum for the pint-size millionaires — sons and daughters of beer-brewing executives, Internet entrepreneurs and the athletes.
FMP sometimes charges extra for extraordinary services. Lintz’s profit margins are 20 percent, well below the 40 percent she says traditional asset managers aim to earn.
“Multifamily offices have been trying to figure out a profitable business model for a couple of decades,” says John Davis, chair of the Families in Business program at Harvard Business School, who studies the firms. “They are seeing the limits of providing a lot of services.”
Clients can be demanding. One whose assets are overseen by Signature schedules weekly meetings with its staff, founder Susan Colpitts says. The firm manages the client’s money, buys and sells his real estate and helps hire household staff.
“We don’t walk the dogs, but we do pay the bills,” Colpitts says.
Lately, the boutiques have been emphasizing another low- margin service: family governance. Family offices convene clan meetings and help appoint councils whose members set an agenda for the family, Harvard’s Davis says.
This delicate work can prevent breakdowns that might land fathers and sons, or brothers and sisters, in court, says Rick Pitcairn, chief investment officer at Pitcairn, a Philadelphia-based family office started by the descendants of John Pitcairn, founder of glassmaker PPG Industries Inc.
Pitcairn serves the fourth and fifth generations of Pitcairns, plus 41 other multigenerational families. Most have from $75 million to $300 million in assets, Pitcairn says.
Unlike Signature and FMP, which serve mostly families that are newly wealthy, Pitcairn deals with old money.
“If you are able to serve one of these complex families in an excellent way, you have the added benefit of creating an annuity effect by forming long-term relationships,” Pitcairn says. “While the margins may be smaller in the beginning, the opportunity to build and expand these relationships over time is far greater.”
Creating long-term family relationships is part of what Lintz’s money camps are about. She says about 30 kids had gone through the program as of mid-July. Another 20 high school and college kids have taken courses on budgets and taxes.
“The firms that are growing are committed to this kind of work,” Lintz says.
The big banks, she says, had better upgrade their services — and maybe hire some camp directors — or risk losing clients to their smaller and more nimble competitors.
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