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Interview With Citi Private Bank: Family Offices' Needs, Business Models Serving Them

Steve Prostano, December 12, 2018

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Editorial advisory board member and wealth industry luminary Steve Prostano talks with Citi Private Bank's Bill Woodson about the work his firm does in informing family offices and ultra-high net worth clients.

This article is written by Steve Prostano, managing partner of SPI Partners, and a member of this publication’s editorial advisory board. Steve has written a number of items for Family Wealth Report. Here, he interviews Bill Woodson, who is managing director and head of the family office group at Citi Private Bank. The private bank has issued a number of white papers exploring issues confronting ultra-high net worth families such as private aviation and cyber-security.

At the recent Family Wealth Report Family Office Summit held on November 1 in New York, industry thought leaders shared the latest thinking on the needs of ultra-high net worth individuals and what it means to integrate a family’s full balance sheet, and examined specific wealth strategies that they can deploy to ensure financial and emotional well-being. The closing panel brought it all together by exploring specific wealth management business models available to these families in the context of the current state of the industry.  

Despite the number of options and business models available to clients today, the panel concluded that there is no single model fully satisfying the unique and dramatically different needs of the UHNW client.  Each business model faces challenges that affect their ability to deliver the value needed for clients.

The biggest concern they discovered facing families, was not just the lack of one business model capable of satisfying all of their needs, but the confusion in the marketplace, compounded by a lack of transparency and education available to these clients.

As part of the foundation for Family Wealth Report’s upcoming UHNW and Family Office Educational Initiative, we continue to explore the needs of various client segments and the business models serving them. Today we will focus on family offices and chose to interview an expert in this space to gain the perspective of Bill Woodson, MD and head of the family office group at Citi Private Bank. 

Steve ProstanoDo you believe that family offices should be recognized as a separate and distinct client segment?

Bill Woodson – Absolutely. As the number of family offices has grown, they have become an even more important and distinct client segment for wealth management firms. They not only control a substantial amount of wealth and do a significant amount of business with Wall Street, but they also have needs that are truly distinct from typical UHNW investors. As a result, family offices can be quite challenging for wealth management firms to serve. A few key distinctions to note are:

- Family offices act and have requirements best categorized as both "private clients" and "institutional investors". They require a high level of expertise and service and often demand institutional accommodations and pricing.

- Family offices are also unique in that they manifest themselves in many different archetypes. They tend to be a heterogeneous group of investors who control a significant amount of wealth, invested across multiple asset classes where decisions are being made by in-house professionals. These professionals must then address the complex and interrelated service and advisory needs of the family, while simultaneously navigating the unique dynamics of working for private families. This can be extremely challenging, time consuming and complex. 

As a result of these distinctions, family offices are emerging as a unique client segment that are perhaps better viewed as companies in a diverse industry; companies with similar needs but which vary greatly in a number of important respects. It is these differences that challenge both traditional family offices and wealth management firms that grew up serving a more homogeneous population of UHNW families and individuals.

Is there a particular business model today that family offices are using in an attempt to satisfy all of their needs?

I believe family offices are using multiple firms to satisfy their broad-based set of needs. Family offices are finding it very hard to identify the right wealth management firm and distinguish between the various business models. This challenge extends into finding the right advisors within these firms because many wealth management teams do not work with family offices on a focused or dedicated basis. For example, while wealth management firms have a significant number of family office clients across the company, these relationships are managed by separate and unconnected teams, each of whom have relationships with only a handful of family offices. Therefore, these advisors have varying levels of contacts in the family office space, insights into their buying behaviors, and understanding about how best to approach, sell and advise them.

How can firms better distinguish themselves?

I believe wealth management firms have the opportunity to distinguish themselves with family offices by outlining their approach, service model, and programs in a clear and transparent way. These firms should be able to articulate that they understand the distinct advisory and service needs of these clients, while ensuring their firm’s entire suite of capabilities is available to them in a seamless manner. They also need to be able to round out their financial offering by providing value-added services including consulting, education, conferences and opportunities to meet and collaborate with other family offices.

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