Close Close

Portfolio > Economy & Markets > Fixed Income

How to Build a Family Office Environment

Your article was successfully shared with the contacts you provided.

Ira Walker looks for ways to re-create his service model and over the years since I first met him in 1988 he has done so to adapt to his clients’ ultra-high-net-worth needs. Now as a managing director and senior portfolio manager, he is doing it again by implementing a family office style environment with his team Walker Wealth Management at UBS Private Wealth Management, a division within UBS Financial Services Inc. You can get a flavor of this service model if you visit Ira’s website:

Ira’s business is focused on ultra-high-net-worth (UHNW) families and institutions. There are many definitions of UHNW. The Wealth-X American Ultra-Wealth Ranking 2014-2015 Report states there are 69,560 individuals with a net worth of $30 million to $49 million.

In this article, first of a two-part series, Ira shares some of his thoughts about managing an ultra-high-net-worth clientele.

Bill: What are the biggest challenges in the ultra-high-net-worth sector of the market?

Ira: Keeping the client focused on their customized investment strategy that I have helped them create.

Every ultra-high-net-worth client has access nowadays to a wide range of firms, investment models and products. Years ago, access was difficult. Now, access is simple. You have to keep your clients focused and disciplined on their strategy. It’s important that the UHNW client remain focused on the strategies that seek to protect their wealth.

Bill: What is your retention strategy?

Ira: I am communicating with my largest clients on a daily basis. I’m sending them information regarding the markets, and in some cases, I’m sending them information that I’ve vetted about their specific portfolio. I’m doing that at 6 o’clock in the morning through 9 o’clock at night. Managing UHNW clients is a 24/7 job.

Bill: So at least for some clients, you have gone to a daily communication formula, correct?

Ira: Yes. Communication, communication, communication. For instance, if a client has a fixed income portfolio and the fixed income markets are reeling like they did last summer, I’m in touch with that client regularly, guiding and directing that client and navigating that client through what’s going on in the global markets.

Bill: How many people can you do this with?

Ira: You have to take the top 100 clients and be very attentive morning, noon and night. This is where a great team comes in. The team keeps the communication flowing and enables the advisor to focus on the clients and their investments, not the operations. If you want to manage money for billionaires and keep the big money coming in, you have to be extremely attentive to your top clients. And in most cases, it may be your top 25 clients.

Bill: What are you doing about new business?

Ira: It’s all new money from existing clients and referrals. Clients need to understand that we are creating a family office environment, and for us to grow organically, we need them to use us exclusively for their financial needs. This does not mean clients cannot have other advisors at other firms. But it does mean we have to be aware of those assets, and in most cases, be in control of those assets

For example, we have many clients who use a commercial bank for their day-to-day operations. We are aware of that and help monitor it on a daily, weekly and monthly basis. I do not want to be in the commercial banking business, but it is essential for clients to know our team works in coordination with the clients’ entire team of advisors, assets and financial activities on their behalf.

You have to be aggressively asking your clients about their assets so that you are aware of everything going on in that family’s financial world. In other words, the key to this is not spending a lot of time trying to get new accounts. The benefit to the UHNW family is that we know everything that is occurring and are always alert for investments that should not be made. We recommend a family office client consult with me before they approve another investment decision. Many times the client doesn’t take the time to communicate. The result is usually painful! We work very hard to help preserve a family’s assets for generations to come.

Bill: How do you do this?

Ira: Let’s say you give a client a great rate on an asset-based loan. He’s borrowing $5 million or $10 million. You gave him Libor plus 75 basis points on a loan, which is 90 bps all in. I might say, “Hey, Mr. Client, we appreciate your loan business, and we’re giving you a tremendous rate. Are there any other assets that you have at other firms that are getting a low rate of return or maybe some cash sitting on the sidelines that you want to put to work? Or maybe it’s a good time to evaluate the rate of return on your assets at other firms. Why don’t you send me all your statements so I can evaluate what you’re doing at other places?” The answer is usually YES.

Bill: What are some of the other services your ultra-high-net-worth clients want?

Ira: Speed is one that I have encountered. Our goal is to provide timely service, so when a client calls up and wants to wire money, we’re there for them to wire money in, wire money out. Clients routinely provide positive feedback on our steadfast commitment to service.

Access to fixed income product is another service UHNW clients typically seek. If an ultra-high-net-worth client wants a certain product and it’s deemed suitable, you should make sure that you can get that product to that client.

An example would be preferred securities.

In my experience with UHNW clients, you have to be knowledgeable of the fixed income market. In my opinion, UHNW clients do not look to grow their money. They already have a lot of money. The typical client seeks moderate growth, dividends and interest income. And if you can bring them a tax benefit, it’s usually met favorably.

The clients like preferred securities because in some cases they are likely receiving above-market coupons on their money with a tax benefit. The client needs to be prepared to own the security for the long term and they have to understand credit and interest rate risk.

A potential pitfall to consider is trying to predict where interest rates are going. You need to open your mind to the client’s needs and objectives, it’s an old school thought. The UHNW client usually wants to preserve their principal and get a reasonable rate of return on their money. You have to give them access to the products that they want. I have seen advisors trying to predict the market and trading every day and missing the big picture. Our team commitment is: if the client needs something that we can possibly deliver, do it.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.