Investing in Alternatives as a Boutique Wealth Management Firm or Family Office

On June 19th, Brian Adams, President and Founder at Excelsior Capital spoke with Biff Pusey, Partner at Kimble Advisory, and DJ Van Keuren, President at Family Office Real Estate about the best practices for family offices and boutique wealth advisors to invest in alternatives.

In this webinar they discussed:

• How they navigated the current crisis
• The biggest threats ahead
• How their investment philosophy will change going forward
• How they deploying capital in this environment

A Look Inside the Webinar

Inbound Marketing, Outbound Marketing and Where to Spend Your Time

No one has time to read every document, attend every conference, and market themselves to families all at the same time. So how does one decide where to spend their time? Van Keuren states that “the average family has three to five operators they work with [and] today around 70%, close to 80% of families want to go direct instead of going through funds for transparency, etc.” The growing number of direct investments makes personal relationships incredibly important for family offices and firms. Pusey advises that people work with their own trusted personal networks to validate sponsors and families for future investments or partnerships.

A great form of outbound marketing is attending conferences. While conferences can be overwhelming, they’re a great opportunity to hear a lot of information in a short amount of time. You hear what people are talking about, have the opportunity to learn about new perspectives and innovations, and assess risk and growth from a national perspective, especially with real estate.

How to Invest with Family in Mind

When investing with a family in mind, Pusey reminds us that “it’s not just their risk tolerance or how much loss they can absorb before they freak out. It’s also what is their expectation of life.” He says that families need to invest with both their current lifestyle and future lifestyle in mind. He says that portfolios need to be built “for families that work in three-time frames: the short-term cash lifestyle safety; the middle term staying ahead of inflation keeping up with the markets; and then long-term building portfolio value so that the families have something to pass along or to give away depending on what their mode is.” 90% percent of wealthy families lose the majority of their wealth by the third generation. Van Keuren suggests investing in real estate because it can be held for a long time. Real estate can be a great “asset [because] it’s not going anywhere, so if you make a good decision and location you hold that thing for the long term, you can get your money back.”

But What About Taxes?

When dealing with taxes, Adams reminds us it is important to surround yourself with the right people. Things that can seem small like “accelerated depreciation under the new Trump Tax Act, cost segregation analysis, and even structuring the quarterly dividends as a return of capital [can have a] huge impact when it comes to the returns to the taxable investor.” As a strong fiduciary, it is imperative to take the tax component of a family office or wealth management firm seriously; and doing that may mean hiring outside help.

The Rise of the RIA

Recently, there has been an increase in the demand for Registered Investment Advisors (RIA). Adams points out how big banks and large investment firms “can’t really differentiate themselves by price any longer, because the cost of trading has really been commoditized. It’s all about access to alternatives to differentiate themselves in the marketplace.” Pusey believes the rise is “coming out of the dissatisfaction with the broker-dealer model.” High net-worth families and individuals are “looking for the true fiduciary where you’re serving your clients’ best interests.” RIAs have more flexibility in their ability to invest in alternatives in compassion to the broker deal platform.