How to Tap Into the 'Phenomenal' Growth of Wealthy Clients

By Jeff Berman

Q&A March 16, 2023 at 10:46 AM

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The number of U.S. investors with assets of $1 million or more is set to reach nearly 28 million in 2026, according to the Credit Suisse Research Institute, up about 13% from roughly 24.5 million in 2021. Meanwhile, some 141,000 U.S. investors had $50 million or more in total assets in 2021, and this figure could grow by 30% by 2025 to over 180,000.

Serving these households represents "a golden age of the financial planning era," as wealthy clients seek access to the best products and services, as well as relationships with financial advisors "they can trust to serve them" as fiduciaries, says Jeremiah Barlow, head of Family Wealth Services for Mercer Advisors. "That's a big trend."

Of course, it takes a team effort to provide high-net-worth and ultra-high-net-worth clients with what they need to realize their long-term wealth goals. A recent Cerulli Associates poll of advisors serving high-net-worth clients found their top business challenges are navigating market volatility (48%), integrating systems (39%), and attracting/retaining personnel (35%).

Barlow — a wealth management executive who joined Mercer in 2013 and is based in Santa Barbara, California — candidly breaks down the multiple challenges involved in providing wealthy clients with the full suite of complex services they are looking for. The former estate planning attorney also highlights what it takes to succeed in these competitive industry segments.

ThinkAdvisor: Could you tell us about Mercer Advisors' family wealth business?

Jeremiah Barlow: High net worth is our core business, and we have an ultra-high-net-worth multi-family office component, as well. They don't necessarily blend together for us. We have a very conscientious segmentation of the two.

Mercer Advisors is a $45 billion assets-under-management firm as a whole, and 75% of that represents the high-net-worth, ultra-high-net-worth and family office clientele — with about 50% … in the high-net-worth realm and about 25% in ultra-high-net-worth, multi-family office.

Mercer as a whole … has about 250 [advisors]. In support of that, we also have a 125-person team of experts exclusively focused on these high-net-worth and ultra-high-net-worth individuals.

This 125-person expert team includes estate-planning strategists, CPAs, [financial] planners and portfolio managers. Also, Mercer has 90 offices around the country [in] … the continental United States plus Hawaii.

Do you have trust and estate attorneys?

Absolutely. What we find is that the clients in this space really want that kind of one-team approach, mostly because a lot of the time you're dealing with a family or multiple generations.

They're really looking for someone who can connect the dots around those areas of planning — tax, estate, investments and intergenerational wealth transfer. We have all of these [experts] in-house.

We have a robust CPA team that does about 5,000 tax returns a year for our clients. Similarly, on the estate planning side, a robust team of estate and tax strategists facilitates not only the planning but also the implementation.

Plus, we have an entire financial planning team on staff that helps build out the plans, keeps them maintained and ensures we're taking care of our clients proactively. We do similar work on the portfolio management side.

Is the financial planning team included in those 250 or so advisors?

It's in addition to the advisors. All of our advisors are planners as well. But we found that when we can support them with people that are exclusively focused on building and maintaining the plan, it allows our advisors to spend the time with the clients instead of building the plan.

The advisor can really spend their time understanding, getting to know the client and serving the client, and then we support them by making sure they have all the tools, the resources and everything that's up to date so they don't have to be an expert at everything.

They have that deep bench built around them, and it's in-house. This means they don't have to worry about talking to an external expert at an hourly rate.

Have you always had in-house experts or at some point did you use third parties?

We built [this team] out over time. When I started at Mercer 10 years ago, we had basically two in-house experts, and it's really been our clients that have [driven] demand. We built out the expert team from what it was (with two individuals) about a decade ago to now upwards of 125.

We do work with outside experts if the clients want them — for example, our ultra-high-net-worth clients in the $100 million-and-up range. They tend to have their own [outside experts] for their taxes because they [pay] multi-jurisdictional taxes across the world. We do tend to work with them through support; we're the extra set of eyes.

What services are most important to clients in this space overall?

It depends on the client's needs. Especially when you get in the ultra-high-net-worth range, the client is going to dictate what they need and what they don't need.

But every client in the ultra-high-net-worth realm … [works with] a dedicated advisory team, CPA, estate planning strategist, planner and portfolio manager — a full team wrapped around them. This goes for not only the matriarch and patriarch but generally for all the family members around them.

Similarly, with the high-net-worth [segment], the client may not need a dedicated person because they may not need planning around all these areas every year, but they do get that team, too. That's available to them as needed. Also, if we can't work strategically with someone [around a specific issue] then we kind of build [the solution] in-house.

We've found that there's a big push towards intergenerational wealth transfer in the industry today. Everyone's predicting this for the baby boomers, and there are a lot of our families saying, "Hey, I want you to make sure you're providing the exact same services to my generation two, my generation three, etc., to make sure that they're supported."

What services are growing significantly?

The tax area is growing rapidly. The industry is shifting — with a lot of people in the tax realm retiring or leaving this business in general. Across the industry, it's been a couple of hard years.

What we are finding is that our clients are yearning or flocking to us saying, "Can you take over the taxes for us?" And the answer is, "Yes, we can." But it's requiring us to put a significant investment into ensuring that we can solve this tax piece for them — not only the planning, but also the compliance piece, the preparation of the tax return.

This demand has ramped up over the last two years or so. You kind of came out of the pandemic with a lot of CPAs that were burned out and decided to ultimately move on. Clients have been sitting there with a need on the tax side that's big — bigger than them wanting to do it themselves or maybe more complex than they would like.

This pickup over the last two years is good because we had started to grow the [tax] business anyway. Our tax team is over 40 strong and could double this year. It is a high-growing area that we're putting a lot of focus on to make sure, again, that we take care of our clients.

Our multi-family office area is also growing quite significantly. We're finding a need for that area, which would include clients with $25 million of assets or more, including upwards of $100 million. Their families want support [and services], but they don't want to have to build them on their own. We have a team that does just that and that has been growing very rapidly in the last year.

What's driving this increased demand?

It's the idea that whoever is serving these individuals now may not be able to provide them with the full experience of holistic in-house expertise. They get pieces of it or get service that's focused exclusively on the investment side.

Clients really want more than this. They want a trusted advisor that is a fiduciary, doesn't have proprietary products and can make sure that the clients' children are properly taken care of, as well.

Also, clients want to go beyond a one-person advisory firm that maybe can't serve multiple generations. They're looking for someone to serve this [family] mix, and they don't want the big institution or a one-person shop. We're in the sweet spot in between [these two types of firms], which is really driving demand.

What's your group's overall focus in 2023?

How we staff up to serve more of our clients. Clients are yearning for the kind of model that I just described, this integrated team of in-house experts that can support them fully. Being able to bring on team members at a fast pace to ensure that we are supporting them is a big focus of ours. It's obviously been a focus in the past and is continuing in 2023.

I would double-click on the family office piece and around building out tax, estate and family governance offerings for our clients in the ultra-high-net-worth space, because they need those services, too. It's a very focused area for our teams.

The teams I work with are made up of experts and service multi-family offices. A lot of times that's where I am focused. Also, we focus on making sure we have the staffing needed for this [work], along with the services and capabilities.

In general, what industry trend is most affecting your advisors and your group?

As I mentioned earlier, clients are really looking for that advisor they can trust, a fiduciary. I see that as a trend. We are in the golden age of the financial planning era of people moving out of the brokerage houses, the wirehouses. And this means not only advisors but also clients wanting those people they can trust to serve them. That's a big trend.

The second trend has been growth of the tax area. Again, it's a particular focus of ours, and one that has been just thrust upon us. This is a significant industry trend, and surveys show that the CPA realm is just being decimated by those that are leaving the industry. Overall, the industry is not replacing them fast enough.

How about your firm's business growth and business building? Can you discuss what's working, what's not and what you intend to do about these issues?

I love this question. We've been blessed with amazing growth, as maybe other advisors as well have seen in the last few years. What's really working for us is this concept that our advisors only serve clients. We have a business-development team that's there to identify clients and determine if they're a good fit, which allows advisors to exclusively serve their clients.

Typically you have a scenario in which that client, when they meet an advisor, … it's the only advisor they'll ever meet with. Due to the way Mercer's structured, we're able to [match] a client with the right advisor anywhere the need for the client sits.

Whether that's geography or niche expertise, our team that identifies the client ultimately … wants to make sure that they're meeting in person and can say, "Great. We have advisors in your area, and we'll find the best fit for you both culturally and based on [your] needs and background."

Maybe that client has a specific need and is in the Midwest. They're selling their business and have a bunch of stock options, for instance. We have experts that do that.

This is helping us grow because we're not constrained by advisors having to go out and both market themselves or bring in the business, and [at the same time] serve their clients. We have the unique ability to place these clients with any advisor across the nation.

As for what's holding us back, we can't grow our tax team fast enough. I may have a hyper-focus on this because we're right in the middle of tax season. But it is something that has really been a focused effort of ours and will continue to be one in the future.

What other internal issues (like hiring or training) and external issues (like competitiveness) do you all face?

I'll double-click on what I said earlier. Our biggest limitation right now is getting the right people in place to serve our clients.

We have a best-in-class recruiting team. Even then, it's been hard. We spend a lot of time on training and have a very robust training team and program.

Getting the right people to serve our clients has been challenging — and it's probably an industry-wide struggle. The good news is we're really good at transformational change as we hit different milestones at Mercer. We've been doing this for a while, so we'll keep doing it the same way. We often transform ourselves to make sure we're evolving.

There really haven't really been any external issues. From a compliance perspective, we have an amazing team that keeps us aligned and in good shape, even though changes on the compliance side have evolved a lot over the last few years. That hasn't really held us back.

As for competitiveness, it keeps us focused on taking care of the clients. You have competitors out there that are helping us be better every day. That's actually a good thing.

The biggest challenge for us is making sure we have the teams in the right places at the right times to take care of our clients.

Many advisors would like to move into the HNW, UHNW and family office segments. What advice would you give them?

The growth is phenomenal. It's tied to a lot of new wealth, both from people who are selling their businesses or building their wealth over time, first-generation wealth and even those who are inheriting wealth from other generations.

It is becoming a "high need" area of the industry. While there are big needs for clients in many different segments, needs in high-net-worth and ultra-high-net-worth have never been bigger.

If advisors want to get into this area, they should spend a lot of time learning what these clients want. That's what we've done. I spent the last decade learning about what these clients want.

Really listen to your clients and also to other advisors. Get involved in opportunities to speak with clients that are in this segment, not around selling [products or services] to them or bringing these prospects on as clients, but instead doing it as a lens for really learning about them.

This way, you can tailor fit what your strengths are as an advisor to what they're going to need. Again, if you always use that lens of what the client needs, then you'll be successful.

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