To successfully grow their practices serving wealthy and ultra-wealthy clients, advisory firms need a "secret sauce" that includes service, scale and technology to differentiate themselves, according to those advisors serving this clientele already.

The way firms develop these attributes will vary, but they’ll all need to create a clearly identifiable brand if they’re to serve clients with $25 million or so in assets.

“We’re in the people business; we don’t have any heavy machinery, we’re not building products,” said Mark Rogozinski, president of family office services at Cresset Asset Management. “But we need to have some sort of secret sauce along the way because investments are getting commoditized. Advisors are hard to find; more and more they’re not coming into this industry like they used to. And so to really attract clients and keep them you have to have some kind of differentiator in a solution.”

Rogozinski spoke about these issues on a panel at BNY Mellon Pershing’s INSITE 2024 conference last week in Nashville, Tenn. The presentation was called “Weaving Wealth: The Tapestry of a HNW and Ultra HNW Practice.” Rogozinski was joined by Jeff Gonyo, head of recruiting at Steward Partners, and Brett Orvieto, managing director and senior wealth advisor at Dakota Wealth Management. Each firm serves a distinct niche in the market serving the wealthy and ultra-wealthy.

The panel was moderated by Jane Volkonitskaya, director of lending solutions at BNY Mellon Pershing.

Rogozinski said Cresset, which currently has about $50 billion in assets under management and serves clients with a minimum of $25 million, has its differentiation built into its origin story.

“We were founded by two entrepreneurs who were really focused on private equity for their own family offices,” he said. As a result, Cresset has Cresset Partners, a private equity entity focused on alternative investments, both direct and funds. “That’s part of the differentiation. We’re not just putting our clients into funds of funds or some other fund managers. We are looking at direct deals and giving many of our families [general partner participation] on those deals versus non-Cresset clients that can go into those products in traditionally LP structures.”

Dakota Wealth, which has about $6 billion in AUM and is still building out its services, said its the differentiator is the expanded capabilities it’s actively integrating every year, Orvieto said.

He added that clients have come to expect a lot more in the past five years, things the firm didn’t necessarily need when it was smaller. “Now everyone needs more capabilities, whether it’s offering alternatives, or estate or tax planning, or options strategies for closely held positions, or bond strategies.”

Orvieto said Dakota manages all of its assets in house with proprietary strategies, giving its advisors a “pretty nice list they can choose from across the board.”

In addition, the firm is continuing to add news skills and niches, acquiring firms when it needs to add capabilities.

“One office has a specialty in 401(k)s and one has a specialty in clients with options in California, different kinds of niches,” he said. “And as we get bigger and bigger, a lot of those niches get pulled out to our other offices and become stronger.”

Steward Partners brought on its own broker-dealer a few years ago, and with that hired a CIO and head of product, Gonyo said. “For our clients to be able to go direct and have those customized solutions, it’s critical. It’s something you have to do.”

Like the other firms, Steward uses acquisitions to fill gaps, and sometimes in unexpected ways.

“This past year we acquired a firm very strategically [with] over $20 million in revenue and $3 billion in assets,” he said. "But what was interesting about that is the average age of the advisor was somewhere between 38 and 42.”

Lending Lends A Hand
Volkonitskaya said lending is increasingly part of the service package these firms need to be able to offer to very wealthy clients, and a lot of advisors who are joining firms are bringing portfolios of various kinds of lending with them, not just portfolios of assets.

“I would say all come with lending,” Gonyo said. “The advisors that we’re recruiting are typically in the top 20% of the market, and the lending piece is really important.”

Steward, he said, has a planning solutions group with lawyers, accountants and a technical coordinator who work alongside advisors when servicing clients. The team recently helped onboard a client with $160 million to whom lending was important.

Cresset also has an internal team that works with outside banking and lending providers, Rogozinski said. The team tracks more than 400 public and private financial institutions to help clients with whatever kind of lending they need, including personal loans, mortgage restructurings and small business loans of up to $50 million.

“That team really focuses on families that are in the ultra-high-net-worth space, because there’s not a lot of value you can add with a $500,000 mortgage, but there’s a lot of value you can add with a $20 million mortgage,” he said.

Orvieto said Dakota also deals with lending, but in a different way, and not just because the firm’s typical client has between $2 million and $15 million in AUM. Dakota’s advisors are often trying to help their clients scale back on the lending they already have, he said.

“When they come to us, they often come from a place that wasn’t treating them very well. Why do they have five lines of credit? The answer is because the [previous advisory] got paid to sell credit,” he said. “In a lot of cases, we’ve had people with more debt than they needed, and we simplify.”

Estate And Gift Tax Reset
In 2024, ultra-wealthy clients are also interested in lifetime estate and gift tax exemptions. Individuals are currently allowed to gift as much as $13.61 million without facing estate or gift taxes on that amount (the number is $27 million for couples). But those big exemptions are expected to sunset on January 1, 2026, and revert to the previous amount of $7 million for individuals (and $14 million for couples).

“This has been a call to action for our advisors to reach out to their clients,” Orvieto said, adding that the ultra-wealthy can be notoriously slow at turning over important documents. “It’s one of the things that people drag their feet on. I have a list of five or six clients that I call and tell them to get a will. And then on the next call I tell them to get a will.”

The urgency is coming from the estate planning attorneys he works with. And to make the urgency stick with clients, he says he brings up the dreaded topic of surge pricing.

“If you come to me in 2024, I’ll be able to treat you nice and all will be good. But if you come to me in September 2025, you’re going to pay four, five, six times because we’re going to be having extra people working on it because everyone wants to do it at the same time,” he said. “You want to be ahead of the game. You want to be there now getting your solution before it’s mass panic as everyone wakes up and tries to solve for it.”

Gonyo agreed there’s no reason to wait, saying that nothing’s going to be done in time if advisors talk to their clients about it October 2025.

“Not only would we get surge pricing and a rush job which will lead to errors, but there’s a good chance it just wouldn’t be done in time.”

Still A People Business
Regardless of the breadth or depth of services these elite firms are offering, the most important effort a firm can make is to attract and keep advisors with stellar people skills who are the right fit, the panelists agreed.

“All the other kinds of bells and whistles and things like that are great, but if your client doesn’t like to talk to your advisor, then none of that matters,” Orvieto said.