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“Beware of wolves in sheep’s clothing” is a common quote that I would imagine that just about everyone has heard at least a few times during their lives. The saying goes all the way back to biblical times where Matthew warns believers to “Watch out for false prophets. They come to you in sheep’s clothing, but inwardly they are ferocious wolves. – Matthew 7:15.”  During the day, the religious elite used a series of expanding rules and regulations to ensnare the faithful, while in many cases disregarding or excepting out of those same rules. Huh, what does that sound like today? Wall Street Perfected Wolves in Sheep’s Clothing Wall Street perfected the art of wearing sheep’s clothing! Never has there been a more ferocious group than the wolves of Wall Street. A recent examples is its exemplary work to confuse retail investors over the issue “best interests.” Best interest is whether your advisor is looking out for your interest or his/her. Clue – it is supposed to be in your best interest. As a registered investment advisor, it has been mandated for as many years as we have been advisors (and then some) that we must look out for the best interest of the client, even if it is not in our best interest. This is the way it should be! On the flip side, commission-based broker and advisor competitors, regulated by FINRA under Rule 2111, have only had to meet a “suitability standard” for any investment or product that they might push your way. This suitability standard requires that the adviser or firm have a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer. This standard is the rough equivalent of licking one’s finger and sticking it in the air to determine which direction the wind is blowing. It is inaccurate at best and highly suspect in its application, especially when a big sales commission is at stake. This is why there are shops today where the solution to every financial issue of their clients is an annuity or some other financial product. How can such narrow products be suitable for everyone? Clue – they are not! Our industry has attempted to clean up this behavioral discrepancy between advisors, like us, and the average commission based broker or adviser, but even the best attempts to do so by the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) ended up as hollowed out versions of the originally proposed legislation after Wall Street’s lawyers and lobbyists got involved. This has left the general public confused and allowed those same FINRA regulated brokers/advisors to hide behind fancy disclosures that proport to look out for your best interests but in reality are full of so many holes that they are really nothing more than a modified version of the suitability standard. Wolves in the Multi-Family Office Space  Securities are just one element of what we do as a boutique, multi-family office. We provide a rather lengthy list of services to our clients, which are customized to each. Here are just a few of the more common services we provide in addition to wealth management:
These services are both technical and expensive to provide given the depth of knowledge required to provide such services. However, in our bubble economy, the multi-family office has become all the rage and quite frankly our competitors, in most cases, are far better marketers. Family offices are popping up everywhere and multi-family offices are doing the same to handle the needs of those with significant wealth, but not so much as to justify a dedicated office and staff just for that family. So naturally many advisors have seen this rise in interest for multi-family office services and have adjusted their business to meet this need. The problem is, just like our brokers friends, they are really nothing more than “wolves in sheep’s clothing.” How do I know this? Because we deal with them every day. Part of our competitive advantage is to say to the wealthy family that we can help you with family office services even if you would prefer others manage your investment assets. As a small firm, this has allowed us to grow and overcome an objection of being smaller, despite what I believe are substantial abilities in the area of investment management. This position, as the trusted advisor, then allows us to see how the ultimate investment manager meets the client’s needs. In many cases, these investment managers likewise claim to provide family office services. I will let you in on a bit of a secret, they don’t! They convince the family that they can do more than investment management and then mainly focus on the investment management while doing as little as possible to slide by on the family office side of the equation. These firms are nothing more than “wolves in sheep’s clothing,” deceiving the family while attempting to lock them into a relationship whereby the family feels they cannot effectively leave. What is the solution? Naturally, it is to vet the firm harder and not be mesmerized by fancy marble flooring and expensive offices. I often find that the client believes “bigger is better” when in reality bigger equals impersonal, cookie cutter and bottom line driven. May I suggest, smaller is better! Smaller in this space means intimate, boutique and a relationship that is more partnership and more family, than institutional. Isn’t that what families want? Next time, why not give smaller a try? Let us know in the comments if you have had a “bigger is better” experience that maybe didn’t end up as expected
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