How they’re helping to reshape SFOs and the private wealth market that serves them.
It’s subtle. It’s anecdotal. But, it’s happening.
More women are becoming involved in their family’s single family offices (SFOs). Matriarchs, daughters, granddaughters and even, in some cases, in-laws, are finding a range of roles stewarding their family wealth. In tandem, more women are becoming substantial wealth creators, and with their new-found wealth, they’re setting up their own SFOs.1 This rise in the influence of women is boosting a change that’s occurring in the tenor of SFOs and how they’re seeking to be served from wealth management providers and advisors.
Women tend to take a holistic approach to how they feel about money.2 They often look at wealth in terms of how it can be used to help achieve things that are important to them. This may include providing support to their community, causes, organizations and family. They’re also often concerned about the potential negative impacts of their wealth on their children. This isn’t to say that men don’t care about these issues. They do. But, this fuller focus is far more pronounced with women when they approach wealth management.
It’s no secret. Women are different from men when it comes to how they interact and relate to others. A primary difference is women prioritize relationships over transactions. This means, when it comes to working with service providers, trust is key. As one second-generation Millennial who runs her family’s office says of choosing service providers, “A sense of trust is very important.”3 A study by Maddox Smye, LLC puts hard data to this sentiment.4 When asked to rank three purchase considerations, women said trust was the most important consideration, followed by liking the product/service and then price. Men led with price, followed by liking the product, with trust being last.5
Taken together, these differences mean as more women become involved in their SFOs or start their own SFOs, the breadth of services that are presented, how they fit together to meet a family’s overall objective of what it wishes to achieve with its wealth and how providers interact with SFOs will need to evolve. Service providers are already under pressure to be more relationship-based and holistic. The rise of women, even if incremental, is helping to keep the pressure on.
The good news is this evolution has begun. But, it’s far from arrived.
As the Millennial SFO head says, referring to conversations she has had with lawyers and advisors, “They’re trying to convince me of their value but haven’t shown me what they do and how it will help me.”6
Women as Change Drivers
The great wealth transition coupled with the rise and recognition of women increasingly controlling the purse strings is leading wealth management firms to place a larger emphasis on meeting the needs of women.
Also, firms recognize that most wealth management offerings are commoditized. Firms need to be best of breed to succeed.
To succeed, providers must also demonstrate that they’re listening to their clients and presenting solutions that can help them achieve their goals. They need to bring all areas of a family’s wealth together and synthesize these as part of a total plan. This is the case across the ultra-affluent service provider spectrum—including multi-family offices (MFOs), private banks and trust companies, individual advisors, attorneys and money managers. Women are associated with responding to this type of approach though it’s what many types of ultra-affluent clients are seeking. The focus on serving women, combined with the rise of women in decision-making and decision-influencing roles, is helping to focus client-centric efforts that bridge goals and challenges to understandable actionable solutions.
“The industry is starting to catch up with what has always been wanted. It doesn’t have to do with if a client is a man or a woman. But maybe women caught on faster,” says Russ Alan Prince, president of consultancy Prince & Associates, who’s conducted extensive research for over 20 years on the ultra-affluent and SFOs. “You need to be client-centric for real—not just on paper,” he adds.7
For issues that ultra-wealthy women are concerned about, see “Common Concerns,” this page.
The Journey
Not so long ago, women from ultra-affluent families were expected to hand over the management of their wealth to husbands or brothers. For many Traditionalists (those born between 1925-1945) and Baby Boomers (those born between 1945-1965), the idea of taking the reins of their wealth or actively participating in their SFOs simply wasn’t in the lexicon.
As women make strides toward gender parity, they increasingly see themselves as having a seat at the SFO table. Women now control 51 percent of the total wealth in the United States, with 44 percent of women now the primary breadwinners for their family.8 They earn the majority of college degrees9 and at this year’s Winter Olympics, women had record representation, accounting for almost 50 percent of the athletes, which is up from 40 percent in 2014.10 It makes sense that as they expand their horizons and opportunities, they’re contributing more in their family’s SFO.
“In the old days, the patriarch ran the family office and there was no board. Now there is more enlightened governance,” says Linda Mack, president of Mack International, LLC, which specializes in providing C-suite retained executive search and strategic consulting solutions to SFOs. Now, the majority of SFOs, and almost all of those with assets north of $1 billion, are run by non-family professionals, she notes, adding that family members do run the smaller SFOs.11
It’s on the board of the SFOs where family members—and increasingly now, female family members—can be found. A diverse board can be more thoughtful, provide different perspectives and help sustain the SFO for multiple generations. The board is the voice to the head of the SFO. It defines the metrics for success, performance and pay of the SFO executives. Women are becoming part of that diversity as boards begin to better reflect the family members the SFO serves.
SFO leaders need the sensitivity to communicate equally to all branches and generations and to make everyone feel they have equal access. Women are equated with high emotional intelligence (EQ),12 a leadership trait that’s increasingly associated with success, says Mack, who this year was named a Top Woman in Wealth Management by Family Wealth Report. Women already have a place at the helm of SFOs as non-family executives. More women, however, will likely be sought out to lead SFOs, particularly as more women serve on the boards and greater value is placed on leaders having high EQ.
In cases in which women family members have training, experience and expertise in investments, they may now have roles on the investment committee or be responsible for setting strategy and choosing investments. This type of knowledge, though not common, is now more prevalent among women than a generation ago. For managers to succeed with women, they may need to change their approach. The Millennial SFO head who’s also responsible for selecting outside money managers notes she often conducts preliminary screens on managers by phone. Here too, she often finds the interactions problematic. “Often a marketer who is most often a man will speak for 30 minutes without stopping. I need a conversation. I don’t need to be told.”13
In many families, women have always contributed to the SFO. They often carve out roles in areas such as philanthropy and education committees. These committees are central to the overall movement of approaching wealth management from a fuller perspective, beyond investments, accounting and tax.
As more women family members join their SFO boards, take on key responsibilities for selecting service providers and find roles within the SFOs, they’ll exert greater influence on the professionals who run their SFOs and the service providers seeking their business.
Women in Senior MFO Roles
There’s a significant change in the wealth management industry toward providing integrated services. The conversation has changed since 2008, notes Jamie McLaughlin, head of consultancy J. H. McLaughlin & Co., LLC.14 The industry is moving away from an investment orientation and trying to help clients understand the purpose of their wealth and how it can help fulfill what’s most important to them. Listening and discovery are central to the client experience.
Providers to the ultra-affluent, and commercial MFOs in particular, have a unique feature compared to other areas of finance. Women are strongly represented at the most senior level. For example, MFOs including Hawthorn and Pitcairn are headed by women. This reflects the focus on EQ and the need to have listeners and understanders. Also, women have been working in wealth management for many years.
For many, serving the ultra-affluent wasn’t an area of finance that was perceived as a place to make your name until the last decade. Areas such as investment banking, mortgage-backed securities, emerging markets and corporate banking were the domain of men. “In 1985 you could not give away these jobs,” joked one woman who rose to be a senior leader in the family office space. “Everyone wanted to be in corporate banking. Women saw the opportunity, took positions and leadership roles and that stuck,” she says.15“They are increasing their responsibility with their tenure. They have the command, applied knowledge and intrinsic skills,” adds McLaughlin. “It is thought that women can carry the dialogue better, deeper and differently.”16
Mentoring and Education
There’s a need for mentoring and education, to empower women family members to understand financial information and have the comfort level and confidence to demonstrate it. “It’s harder for women to get on the board. Even with the same qualifications as a man, they often don’t show well. They need confidence around finance,” says a non-family SFO executive who also serves as a board member for a number of SFOs. There are built-in biases in family systems, and there are preconceived notions, she notes. “Because you’re so-and-so’s son or daughter, you aren’t capable. This can be particularly inhibiting for women in the families.”17
Indeed, a daughter building her role in her family’s SFO concurs. “I need a more meaningful way to be spoken to. Mentorship is ideal. I can’t hire anyone who will care more than I care. I need to know how to do it even if I may outsource,” she said, referring to manager selection and other core family office decisions. She added she would like to find one-on-one mentorship or women-only classes on sophisticated wealth management subjects—such as private equity, hedge fund due diligence and risk management.18
The Millennial SFO head noted training was key to her taking on more responsibilities in her family’s SFO. She started at the bottom and over a period of five years learned not only how to run the SFO but also how to invest. “I started at the bottom. I had a fund. I did P&L [profit and loss] reconciliations, operations, a little research on investments,” she said.19
Finding a Seat at the Table
Families are, in some cases, actively opening opportunities for women to join. “I never felt resistance about becoming involved. My family was really happy about it. They wanted me to be interested,” said the second generation Millennial who’s managing investments in and running her family’s office.20
Others families merely aren’t blocking efforts for the women to have a voice. “My age is the last remnant of old-school,” said the second-generation daughter who’s carving out a role for herself in her family’s office. “I had to assert myself intentionally, and I continue to have to do that. I and other women my age see bias. We have talked about that.”21
It’s important to recognize that SFOs are extremely situational. It’s common for SFOs to find it challenging to engage and garner interest from those they serve. Whether women in the family step into roles in the SFO is often a reflection of the family’s dynamics. As the non-family SFO executive noted, “It is amazing and surprising. I would expect more women to take roles in the family office. I have seen daughters step up almost begrudgingly. It is very dependent on who the owner of the money is. If the creator is a man, daughters may or may not step up. Sons often overshadow them.”22
Another SFO executive adds that even in cases in which there’s support from the patriarch for women to be involved in the office and there are no sons, the women may not care to be involved. As with any heirs, men or women, sometimes it’s a matter of timing, what’s going on in their lives and personal interest.
The New SFOs
The new SFOs that women are setting up are, from the get-go, beginning with a comprehensive, holistic approach to managing the family and its wealth. Traditionally, SFOs have started with investments, often after a substantial liquidity event and gradually built out services over the years. “Women in particular, but especially those under age 50, have a much more holistic perspective. It isn’t just investing; it isn’t just accounting. When women create money, their SFOs have much more of a family orientation,” says Prince.23
When women set up SFOs, they often include services such as education, family banks, concierge medicine and philanthropy. Education efforts help teach financial literacy, how the office works and what the advisors do. The family banks, in part, are a way to fund, encourage and teach entrepreneurial pursuits while also providing a means to give access to capital in general. Concierge medicine provides unique access when health issues arise and fits in with a focus on wellness and healthy living. A philanthropic component ensures the wealth is being deployed in ways to positively impact local communities and society at large.
Part of this expansive approach to initial services is a result of how women think about wealth. But, part is also because there’s far more awareness now of what a family office is and can offer. “More families are saying, ‘Let me understand the range and start with the range of services,’” Prince says.24
The rise of women is infusing energy and focus into efforts by firms to take holistic client-centric approaches. Culture change and execution won’t, however, be easy. Those who can truly look at the larger question of what’s the purpose of wealth and how can it be deployed and managed to help fulfill client goals will be positioned to differentiate themselves from competitors.
—The views expressed in this article are those of Mindy F. Rosenthal individually and shouldn’t be construed to be the position of PNC Bank, National Association or any of its affiliates.
Endnotes
1. Russ Alan Prince and Hannah Shaw Grove, Women of Wealth, Understanding Today’s Affluent Female Investor, ISBN: 978-1-938130-32-8 Library of Congress Control Number: 2004105329.
2. “The New Wealth Paradigm: How Affluent Women Are Taking Control of Their Futures,” 2009 Campden Research/Relative Solutions.
3. June 29, 2018 phone interview with an ultra-affluent daughter who runs her family’s single family office (SFO).
4. Maddox Smye, LLC.
5. Ibid.
6. Supra note 3.
7. June 26, 2018 phone interview with Russ Alan Prince, president of consultancy Prince & Associates.
8. 2014-2015 Prudential Research Study, “Financial Experience & Behaviors Among Women,” www.olympic.org/women-in-sport/background/statistics.
9. National Center for Education Statistics, “Table 318.30: Bachelor’s, Master’s, and Doctor’s Degrees Conferred by Postsecondary Institutions, by Sex of Student and Discipline Division: 2013-14,” 2015 Digest of Education Statistics.
10. Supra note 4.
11. June 14, 2018 phone interview with Linda Mack, president of Mack International, LLC.
12. Korn Ferry study, www.psychologytoday.com/us/blog/mind-the-manager/201603/new-research-women-consistently-outperform-men-in-eq.
13. Supra note 3.
14. June 20, 2018 phone interview with Jamie McLaughlin, head of consultancy, J. H. McLaughlin & Co., LLC.
15. June 13, 2018 phone interview with a former senior bank executive and SFO head.
16. Supra note 14.
17. Supra note 15.
18. June 22, 2018 phone interview with a second-generation daughter who works in her family’s SFO.
19. Supra note 3.
20. Ibid.
21. Supra note 18.
22. Supra note 15.
23. Supra note 7.
24. Ibid.