Family life is more complex than ever before. The effects of the Covid-19 pandemic, geopolitical unrest, and global inflation have led to one of the most difficult financial environments in living memory. Major global trends, including digitalisation and climate change, have the potential to touch every aspect of life. And families must evolve to meet these challenges as the needs of younger members are balanced with the priorities of the older generation.
Why is expert advice so valuable?
Expert advice must keep up with the pace of change. Even the most trusted, long-standing advisors may not have all the answers. More families are seeking outside help to complement their existing advice networks. The experts surveyed for the 2022 Julius Baer Family Barometer told us that legal issues, wealth management, and family governance were among the most common reasons for families to seek external advice. The experts also reported that ultra-high-net-worth (UHNW) families are seeking help to guide them through a variety of broader challenges, including education, healthcare, and lifestyle decisions.
As Guy Simonius, Head of Family Office Services at Julius Baer, states: “Helping globalised families navigate the growing complexity has become a team approach. We observe that the best-performing advisors tend to be the ones that know their limits, excel in the field of their expertise, and work hand in hand with leading experts in others in order to deliver the best possible results and mitigate risks where needed.”
The evolving role of external advisors doesn’t stop there. Families seem willing to take an international approach to finding the best advice, reflecting the increasingly global nature of the UHNW lifestyle. Roughly half of the families represented in this survey had relatives and/or business interests on more than three continents. With the inevitable complexity of living in multiple jurisdictions, it is perhaps unsurprising that more than one-third of the surveyed experts said that the geographic location of external advisors was less important than other factors.
And, although there was a strong preference among families for doing business in the client’s native language, nearly half of those surveyed said an advisor’s cultural background was not a significant factor in deciding to appoint them.
Selecting an advisor
This year’s edition of the Family Barometer again emphasises the weight families give to personal introductions and referrals. More than threequarters of the experts surveyed said that a referral from a family’s existing professional network was the most common route to finding new external advisors. Referrals from family and friends came a close second. Families seem to prefer this informal word-of-mouth approach because it gets to the heart of what they value most from an expert advisor.
Our survey findings show that while specific, objective factors like price and technical expertise are important, they are rarely the deciding factor. Certainly, tact and empathy are considered more important than price, suggesting that when it comes to expert advice, cost counts for less than character. Indeed, when families were asked what matters most, the answer was clear: integrity.
Despite the enduring popularity of referrals and personal introductions, the experts surveyed reported that more than half of families would likely get better results if they took a more structured approach when selecting outside expertise.
Discussions with the survey participants suggest that the results from word-of-mouth searches can be hit or miss. While it isn’t uncommon to find relevant, high-quality external advisors by networking, there is a risk that families end up looking too close to home. A more rigorous, comprehensive search could be the difference between making a costly mistake and finding an appropriate expert solution that helps a family navigate their future safely.
The reluctance to use a structured search
Despite the apparent benefits of using a structured approach to finding external advisers, half of the families represented in our survey choose to not do so. The experts consulted for this survey told us that families might be reluctant to use a structured search because the character and integrity they value so highly are complex traits to screen for.
The best of both worlds
It seems finding an advisor is simple; finding the right trusted partner is more complicated.
With a bit of imagination and planning, families could use a hybrid approach to reaping the benefits of a structured search without neglecting the criteria they value most highly: character and integrity. The experts surveyed suggest a simple four-step process as a starting point:
First, begin with written goals that clearly state what advice is needed and why. Committing to a focused brief gives the search purpose and direction, whereas vague goals are likely to yield vague results. Second, identify a long list of potential experts using objective search criteria such as fees, location, and experience. Third, conduct systematic due diligence to produce a shortlist of vetted, suitably qualified candidates. Finally, families can carry out their enquiries and form their judgements about the integrity and character of the best-qualified candidates.
The final decision obviously lies with the family, who should feel comfortable not only on a professional level but also on a personal one. It is a very personal decision after all or, as Nicolas de Skowronski, Head of International Wealth Management Solutions at Julius Baer, states: “Even the academically best trained advisors will fail if they cannot win the trust of families by showing not only professionalism but integrity and empathy. Personal connection is at the heart of what we do.”
There may also be a more fundamental challenge: our discussions with families and their advisors suggest that the definition of integrity varies from family to family and within families. No wonder it proves hard to find an external expert when the very qualities you are searching for are difficult to define.
The findings of this year's barometer indicate another, more straightforward reason why families may avoid a structured approach to finding external advisors: a perception – often inaccurate – that a formal process is more time-consuming than word of mouth. Families with complex lives often see personal introductions as a valuable shortcut to finding the right advisor, especially if they think the alternative is a burden that requires significant planning and administration.
Yet, families should consider the time spent on a structured search as an investment in the future; the benefits of good advice are likely to be remembered long after the cost has been forgotten.