Create a path to partnership

Improve Your Relationship with Your Client’s Family Office

A recent study says you should create a partnership.

A recently published Family Office Exchange Thought Leaders Council Report, “Strengthening the Partnership,” offers insight on how advisors and clients can transform their relationship into a partnership. Before delving into the details of the study however, let’s cover the basics.

The Difference Between a Relationship and a Partnership

According to the study, partnerships differ from relationships because there’s a stronger and deeper bond that exists between the parties in a partnership. Partnerships are the optimal way to fully realize the value of advisors’ expertise and successfully preserve the family legacy. Like many relationships, these professional partnerships are built on trust. 

Though it may sound like a simple progression that comes naturally over time, growing a relationship into a partnership can be very complex, requires effort from both sides and doesn’t always come to fruition. In fact, many of the FOX members who were interviewed for the study admit that they don’t expect a majority of their family client/advisor relationships to become partnerships.

The Four Cs

There are four key elements that affect the success of the partnership (and which are necessary to take the relationship to the next level) — Culture, Chemistry, Collaboration and Competencies.

Culture. The advisor must have a cultural fit to the values of the family. The study cautions that sharing culture doesn’t mean seeking advisors who are similar to the client. Too many like-minded thinkers may actually impede growth; individuals with differing ways of thinking can better complement each other.

Chemistry. Described as an intangible quality, the study explains that chemistry is an essential component in a professional relationship because the ability to mesh well and read a positive vibe from each other creates trust and ease between advisors and clients. The professional version of lovers being able to finish each other’s sentences, I suppose.

Collaboration. Advisors who engage with clients, other advisors and brainstorm together tend to arrive at better solutions. An advisor who simply takes orders from a disengaged client will struggle to turn a relationship into a partnership. Advisors who have a superiority complex and would rather prove to a client that they know best instead of working together with other advisors face the same roadblock.

Competencies. A somewhat obvious element, an advisor must be tooled with the skills and expertise necessary to solve a problem. It goes without saying an advisor must bring something unique to the table. 

Partnership Roles

A passive wealth owner can be detrimental to the family office. The study finds that a three-way relationship among the wealth owner, family office executive(s) and advisors is crucial to building a successful partnership. The wealth owner sets the tone, “imprinting their vision on the partnership”¹ and encouraging the partnership to grow, but must resist the urge to control the process.

The family office executive “respectfully challenges owners to arrive at best decisions,”² facilitates interactions and provides feedback to all partners.

Advisors, as previously mentioned, must possess the necessary expertise and be willing to collaborate with other partners (including other advisors) to arrive at custom tailored and creative solutions. Accordingly, they must also be exceptional listeners, learning to understand the different personalities of the family and picking up on concerns that aren’t always communicated clearly.³ The best advisor knows his client well enough on a personal level to know how the client would want a situation handled, without having to ask.

Structuring the Partnership

The study lays out three different models for structuring the partnership. The most simple, the Wealth Owner Led model, vests the leadership role in the wealth owner or a most trusted advisor who relies on an outsourced team to get things done.

The next model, the Family Office Executive Led approach, is accompanied with a higher degree of execution risk. This model is for the wealth owner who’s willing to put his trust in his team, particularly the family office executive, who then also establishes his own network of trusted partners. 

The most complex of the three, the Team Led Partnership model, involves numerous family members in the decision-making process. The model is best suited for large family offices, likely in advanced generations that have a proven and established information-sharing technology system in place, to allow for high levels of engagement among all participants.

Choosing the right family office structure is key to a strong partnership; typically the size and generational stage will guide the way in determining which model is the best fit for the family.

Assessing the Partnership

The study suggests various questions that can be asked during the annual assessment of the family office to help strengthen the partnership and learn from mistakes. All partners are encouraged to share constructive feedback based on their review of the partnership at a group session initiated by the leader (sometimes it may take more than one meeting to determine issues and strategize possible solutions). Questions to ask include: How much support do you have from all stakeholders? Are you prepared for disagreements?

Screening the Advisor

The study also lists additional questions to ask as part of advisor due diligence. These questions are intended to help identify whether the advisor possesses the characteristics that will enable him and the client to form a strong partnership. Questions include asking the advisor to describe his ideal client relationship and why he does what he does. Though this advice appears at the end of the study, the screening process is actually one of the first steps to selecting an advisor with partnership potential.

Endnotes

1. FOX Thought Leaders Council Report: Strengthening the Partnership (2017), at p. 15.

2. Ibid.

3. Ibid., at p. 13. 

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