Why Wealthy Families are Turning to Independent Wealth Managers 

Insights

Traditionally, the term “wealth management” conjures images of vast, venerable institutions. Gray suits. Jet black buildings. Nineteenth century founders. And yes, these monolithic enterprises have served wealthy families well for hundreds of years. 

But a transition has begun. Affluent families increasingly find themselves turning to independent wealth managers. Firms with tight-knit teams, family offices, and novel strategies.

Why the paradigm shift? How did old school financial behemoths lose their luster, and what do successful families stand to gain by entrusting their assets to leaner, fresher firms? The answer lies at the intersection of multiple trends.

#1 Tighter Regulations

In the wake of the 2008 financial meltdown, the government issued a flurry of major regulations. Designed to reform institutions’ internal processes, and curtail excessive risk-taking, these measures forced banks to turn their focus inward. As a consequence:

• Client service fell by the wayside

• Individual needs and goals sank below collective compliance concerns

While most top firms maintained adequate returns, personal connections frayed and opportunities for accelerated growth slipped past unnoticed. Families who valued tailor-made approaches and long-term relationships found their wealth management wanting.

The ensuing years have only added to the regulatory burden, with no sign of a letup.

#2 Pressure for Shareholder Returns

Wealth managers, even at colossal firms, technically must observe myriad fiduciary responsibilities. Most importantly, they must base decisions solely on the best interests of the client, rather than what generates superior revenue for their company. 

• In practice, large institutions often operate under intense pressure to generate lofty returns for their outside shareholders. 

• This incentivizes aggressive maneuvers and the invention of new, in-house investment instruments that feature robust fees and returns to the firm.

Smaller, independent offices serve no one beyond their clients. As the business’ sole lifeblood, customers come first. Wealthy families can rest assured that decisions don’t stem from a hidden, shareholder-driven agenda. 

#3 Comprehensive Management

Wealth management encompasses far more than steering investments. Families need to consider:

• Tax strategy
• Retirement planning
• Estate management
• Risk mitigation

Independent wealth managers take a holistic view of their clients’ financial life. By studying the full picture, they can craft a cohesive strategy that optimizes the entirety of a client’s financial landscape.

Such an approach paves the way for long-term growth and success—especially important for passing on a family legacy.

#4 Superior Transparency

One of the hallmarks of monolithic wealth management firms? That would be hidden fees. A consequence of the above-mentioned shareholder pressure, these sneaky add-ons often come cloaked in streamlined pricing and only become apparent later.

Many wealth managers also operate under commission structures that can generate conflicts of interest and the temptation to bake in managerial bonuses. Clients are often unaware of these extra charges, and firms take care to keep them concealed.

Independent wealth managers, whose compensation derives from the success of their client’s investments, offer a more “open book” approach. Given the simplicity of a small firm’s structure, clients can readily verify fee structures and gauge motivations.

#5 Adaptability

While large firms may benefit from “too big to fail” status, they’re not renowned for agility in responding to shifting tides. In fact, the extensive compliance standards they face render rapid adjustments an onerous challenge. 

Unencumbered by lengthy bureaucratic proceedings or convoluted internal processes, small firms can change pace on a dime. Seizing fleeting opportunities becomes second nature, and clients’ accounts reap the rewards.

When volatility strikes, a nimble response can often mark the difference between catching a wave or sinking beneath a tsunami.

#6 Preparing the Next Generation

When it comes to sustaining generational wealth, financial literacy in the rising generation takes precedence. Adept stewards require a strong grasp of the:

• Specific assets under management
• Strategies guiding long-term growth
• Tax implications and pitfalls
• Future sources of growth

The personalized attention offered by small firms offers the ideal opportunity to bring younger generations into the financial fold. 

By participating in strategy calls, listening to managers’ input, and contributing their own insights, they learn to take charge of their wealth and grasp the full picture of the financial and regulatory landscape. 

The impending “great wealth transfer” makes financial literacy even more imperative. With scores of Gen X and Millennials set to inherit substantial assets from their grandparents, sound foundations may be the deciding factor in maintaining family wealth.

Tomoro: Bespoke Wealth Management Today

As societies evolve, so must their institutions. And the world of wealth management is no exception—the trend of successful families partnering with family offices will continue. The benefits simply outweigh the convenience of remaining with legacy firms.

When it comes to independent operations, Tomoro leads the pack. Our veteran team, composed of battle-tested experts, puts client needs first. Our innovative approach prioritizes tailor-made solutions, data-driven insights, and the utmost transparency.

Ready to discover how it feels to come first? Let’s talk today.