While many financial planning professionals serve super-wealthy clients, it’s a highly focused specialty for Paul Karger of TwinFocus, a $10 billion multifamily office that works exclusively with ultra-high-net-worth clientele.
The firm serves just north of 40 UHNW families, Karger told ThinkAdvisor during a recent interview, and it takes on only about three to five new clients per year.
“We have to be very selective in the clients we start to work with because of the tremendous service needs that they bring to the table,” Karger said.
“Service scale creep is a real thing in this space, because when you’re working with clients with so much wealth and complexity, they really want a one-stop-shop kind of approach. It’s wonderful to build those relationships, of course, but it is a lot of work,” he said.
One unexpected finding of working in the space, Karger observed, is that just because people were successful in accumulating wealth doesn’t necessarily mean that they are adequately prepared to steward that wealth over multiple generations.
That’s true for both primary types of clients the firm serves, Karger said. Those include those who accumulated wealth steadily (think successful private equity principals) and those who accumulated their wealth suddenly (think successful business owner post major liquidity event).
“In fact, I often tell our prospective clients that our first job is to protect this tremendous wealth that they have built from the outside world — from bad investments or untimely philanthropic requests,” Karger said.
“But our second job, I quickly add, is to protect them from themselves. People always assume their business skills are transferable to family office management, and that’s not usually true,” he added.
In fact, clients coming to the firm generally have fallen prey to at least one of a series of “surprisingly common” money management follies, Karger added. They’re seeking TwinFocus’ expertise to address them before irreparable damage is done to the family fortune.
“So, it’s often a really big lift for the first 12 to 18 months that we’re serving a new client, because there may be one or two big issues that we need to tackle before we can put them on a more routine service and support plan,” Karger said.
"The bottom line is that no fortune, however large, can be managed in a haphazard way, and nobody is insulated from the possibility of making significant investment or spending mistakes," he said.
See the accompanying slideshow on the six biggest mistakes that incoming UHNW clients make.
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