It’s highly unlikely you’ll ever see a billionaire walking into the office of a national broker-dealer, the one at the end of a local strip mall.
“Billionaire clients do not look for a financial advisor in the traditional sense,” says Sharon Olson, founder and president of Olson Wealth Group in Bloomington, Minnesota. “They look for life advisors, people who can simplify their life when the complexity of the business of the family starts to detract from other priorities.”
Managing a billionaire’s finances may entail intricate financial instruments, such as trusts, foundations, and investments in various industries and asset classes. In addition, tax optimization and estate planning become paramount to preserving wealth across generations.
While allocating into a balanced portfolio of cost-effective exchange-traded funds is frequently a winning strategy for mass affluent clients, that’s usually not enough for a billionaire’s assets.
“A trusted advisor will work alongside clients to help create and execute a customized portfolio based on their client’s needs and objectives,” says Karen Harding, a partner in the private wealth practice at Boston-based NEPC.
The factors a billionaire’s advisor considers include goals and objectives, risk tolerance, tax status, cash flow needs and entity structure in order to build an appropriate portfolio, Harding says. Here are some of the criteria billionaires use when selecting financial advisors to handle their wealth:
Experience in Maintaining Multi-Generational Wealth
“With over three decades of experience working with ultra-high-net-worth clients, we often see a focus on maintaining multi-generational wealth,” Harding says.
“One consideration to keep in mind is that clients often still own the operating business which created their family’s wealth,” Harding adds. “If this is the case, the investment portfolio needs to take the operating business into consideration when decisions are being made for the investment portfolio.”
The considerations go beyond allocating the portfolio. Billionaires generally have philanthropic endeavors that require expert guidance on charitable giving and impact investments. Security concerns, confidentiality and strategic wealth management require a specialized approach.
For all those reasons, billionaires typically rely on a team of financial experts, including tax specialists, estate planners, investment strategists and security advisors, to navigate their financial landscape effectively.
A Multidisciplinary Team of Specialists
For ultra-high-net-worth individuals, including billionaires, assembling a team of specialized advisors is not a luxury; it’s essential, says Chris Mays, partner on the family office services team for accounting and consulting firm Armanino in El Segundo, California.
Mays says a multidisciplinary team helps ensure the management, optimization and preservation of wealth, freeing the client to concentrate on other important matters.
“Relying on a single advisor is generally inadequate for navigating the complex maze of financial, legal and tax issues associated with substantial wealth,” he says.
That level of complexity means an advisor serving ultra-high-net-worth clients must assemble a team that includes certified public accountants, estate attorneys, bookkeepers, corporate attorneys, administrative specialists, real estate professionals, bankers and even a travel concierge.
“Risk management is also critical, so making sure that there is a dedicated insurance and legal team in place is key,” says Jon Ekoniak, managing partner at Bordeaux Wealth Advisors in Menlo Park, California.
“It’s important to have access to best-in-class providers who have worked with complex situations before,” he says. “A team that has helped a multimillionaire may not always be able to assist a billionaire, for example.”
Ability to Handle Complex Situations
Ekoniak says many of the largest wealth advisory firms are built for scale, which usually involves a large volume of smaller clients. That’s a different model than an advisory firm tailored to serve the mass affluent.
Because a billionaire’s situation is more complex than the average investor’s, a wealth advisor serves as the billionaire’s advocate and vets the most appropriate vendors for each situation, he adds.
“For example, one estate attorney may be great at intergenerational wealth transfer but not be the right person for charitable gifting strategies,” he says.
Billionaires require specialized services and expertise on everything from aircraft leasing to property management and natural resource extraction, with financial services just one item on a broader menu, says Olson.
“The key is to serve as the trusted advisor, sourcing and coordinating all of the activities and services,” she says.
Those services are not where the menu of special features ends. Issues may arise that require an advisor to be available around the clock.
On Call for Billionaire Clients
“While we find that billionaires are respectful of our time, being available 24/7 is essential,” says Russ Prince, a strategist for single-family offices who currently works with Oaktree Solutions, based in Brooklyn, New York. Prince is also the author of “Optimizing the Financial Lives of Clients.”
When a problem does pop up, Prince says, it’s vital that billionaire clients get answers and potential solutions as fast as possible.
In some cases, the communications can take on a cloak-and-dagger character, due to heightened security concerns. “Communicating with some billionaires takes on many forms, from encrypted phones and emails to dark web bulletin boards to only discussing matters face-to-face,” says Prince. “We always accommodate how our clients prefer to interact.”
Harding says billionaires seek advisors with whom they have a strong alignment and no conflicts of interest.
“They tend to work with advisors who have the deep resources required to successfully execute their desired plan, who have the technical skills required to create and implement a sophisticated portfolio,” she says.
Track Record of Working With Similar Clients
Billionaires also want to know that their advisor has experience working with similar clients, meaning they understand how to integrate tax and estate considerations into the investment plan.
A financial advisor serving billionaires needs a deep understanding of his or her clients’ unique financial goals, risk tolerance and sophisticated investment strategies. Tailored advice, asset diversification, tax optimization and continuous monitoring are essential.
A diversified team of advisors with specialized knowledge and experience offers ultra-high-net-worth clients broader access to investment opportunities, market intelligence and professional networks, says Mays.
“A team of advisors allows these individuals to efficiently navigate the complicated financial landscape, maximize their valuable time, and focus on their primary interests and personal lives, all without getting entangled in the minutiae of daily financial management,” he says.
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How Financial Advisors Work With Billionaires originally appeared on usnews.com
Update 09/29/23: This story was published at an earlier date and has been updated with new information.
