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| Best Practices: Financial Advisors |
Finding the Perfect Fit
Sara Hamilton
12/01/2004
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“Our mantra was
integration, communication and proactivity—those were the pieces missing in our
virtual family office,” says Harrison Hobart, who serves as one of the family
trustees. The family determined that in order to achieve these goals, they
needed to find a firm that could offer more comprehensive family office
services.
| “Our mantra was integration, communication and proactivity—those were
the pieces missing in our virtual family office.” |
Hobart explains that, because the family is spread out
geographically, the advisor’s location was not a central concern, but the family
intended to search for a firm in a major financial center. Initially, they had a
bias against large firms because they had found it frustrating to deal with a
corporate custodian, but soon more qualitative issues, such as finding a firm
where the business model could serve the family’s needs over time, became more
important. Also, the significant investment in time, effort and money required
to conduct the search made it clear to the family that whatever decision they
made should be a lasting one.
To create the due diligence team, Hobart
invited the family’s lawyer, two trustees and other family members to
participate. From there, they developed specs and screened candidates. A group
of 12 family members interviewed those firms that made it to the short list, and
eventually they narrowed the field to two or three. At that point, the family
shared information freely, providing the finalists with family trees, legal
structures, asset allocation and background on the performance of investment
managers.
“We wanted the burden to be on the firm to show us if they wanted
the business,” Hobart says. “And we wanted to test their intellectual
horsepower, their ability to come up with value-added ideas and to think on
their feet. We wanted to see what they would do with our trust documents.” In
the precommitment stage, U.S. Trust analyzed the family’s situation, including
its investment process and performance, as well as its ownership structures. It
provided specific recommendations that were very impressive, Hobart notes.
As
a result, despite the family’s initial bias against large firms, they selected
U.S. Trust. “The small firm I thought was the lead candidate early on faded in
the backstretch when the principal was out of town and the person who would’ve
been the lead couldn’t make decisions,” Hobart says. “Furthermore, we expected
smaller, leaner shops to be more lenient in pricing and found that, in fact,
larger shops have more flexibility. Our experience is an endorsement of a
patient process. The right fit emerged over time.”
An Insider’s Point of View
Not until he neared retirement did the former
chairman of a major New York-based money center bank start paying enough
attention to his own personal finances to realize he needed help. “I was like
the doctor who neglects his own health,” he admits.
Despite assistance from
his employer’s private banking group, he soon concluded he would have to go
elsewhere to find the comprehensive servicing he required. “I was looking for
all those things you would ask a CFO to be on top of—combination chief financial
officer, treasurer and an accountant all wrapped into one,” he says. “I also
wanted someone who would sit with me when I was talking to other advisors and be
on my team.”
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