Does your data aggregation software account for submarines?

The needs of the ultrahigh-net-worth client are markedly different from the mass affluent market, and so the advisory tools naturally have to be different too, says Private Client Resources CEO Robert Miller.

Submarines are in fact one of the very unique variables that fall into the illiquid assets categories that Private Client Resources’ platform can account for, which Miller notes most advisors have no automated way of regularly recording, other than entering the information into a platform themselves.

Illiquid assets make up 30% to 60% of an UHNW portfolio, he notes. “The pie chart looks very different,” he says.

Such targeted, automated aggregation isn’t easy to achieve, though. Through client authorizations, the platform stitches together information from over 2,000 managers, Miller says, in addition to the data going through a conversion, verification and reconciliation process.

Private Client Resources CEO Bob Miller
"You won’t find many RIAs with a bunch of $500,000 clients, and one $20 million client," says Private Client Resources CEO Bob Miller.

It results in tens of thousands of mailed documents, PDFs and emails received by Miller’s firm, which is continually automating how it gathers information. Still, with daily posting of transactions and changes in values in illiquid assets, the platform replicates and speeds up the work done in the past by costly, specialized research teams.

The platform’s unique aggregation abilities have earned it a steady stream of clients. With over $200 billion in assets for 2,000 families now being aggregated through the platform, Private Client Resources’ clients span from the single ultra-high-net-worth family, to RIAs with sizeable UHNW assets and private banks.

Though there is a proliferation of wealthtech tools, many advisors are still not equipped to handle the unique demands of clients when they cross the UHNW threshold, Miller tells Reinvent Wealth.

What follows is our interview, which has been edited for length and clarity.

What are UHNW clients now asking for in terms of data insights?
Every morning at 8 am, regardless of the asset class, transactionally they have 99.9% accurate data, whether its tax planning, estate planning, how they’re thinking about a business liquidity event, how they are thinking about risk and exposure. These were all special projects before that we had to figure out how to gather and normalize.

Now that’s served up every day, and they are free to more aggressively look at risk and investment opportunities. Remember, they are different than other investors in that they’re not driven by returns like the rest of the world. They’re driven by cash flow, and balance sheets; their ability to be philanthropic and planning for what money they are going to leave for their children. They have activities in their lives that are different.

We have two submarines on our system. It matters to them! They care about this. Whatever the worth of the submarines is, that’s part of their total wealth. If they wanted to do something, they could sell one of their submarines. So having this information has freed them. Maybe they have had someone doing their taxes, or a controller in their business monitoring some of their real estate investments. This tool gives them a hardened, institutionalized way to think about their data, and what tools can inform them and provide insight.

Can technology help an advisor attract and manage a UHNW client?
Many RIAs accidentally become UHNW advisors in the course of their careers, when a million-dollar client sells their business and makes $50 million. Most of them lose that client. They will not be the long-term advisor, because they are not specialized in the things that that client needs. You won’t find many RIAs with a bunch of $500,000 clients, and one $20 million client. Why? Because they’re not equipped to manage the requirements of that particular family and client; it’s not about returns, it’s not about balanced portfolios. It’s the whole strategy that has to be different.

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Let’s say I’m a $100 million guy, and I made all my money in real estate, if I look at my portfolio, it’s probably 70% weighed in real estate. An advisor might say, that’s too heavily weighted in real estate, you need to have more of this, you need some of that. But the client’s exactly where he wants to be because that’s how he creates wealth. Traditional advisors don’t understand that, they’re lined up with cookie-cutting this management of portfolio construction rules.

Secondly, the family becomes the client, not the client. Considering all of the things that go into managing a wealthy family — 30% of our clients are more than three generations — you’re going to have to adjust for the millennial shift. A whole generation of client getting access to wealth they didn’t earn. All the family angst about protecting that wealth, how to educate their children about how to sustain that wealth and sustain philanthropic activities, these are things that traditional advisors are not trained to do. It’s not part of the book of work up to that point.

So doing UNHNW advisory, you have to do it on purpose. The systems are different. You probably have more business services-type bill payments. Your advisory teams around attorneys and accountants are different because there’s so much more transactions involved. Organizationally, emotionally, and from the standpoint of the demands of a family, it’s all different.

Embracing technology to serve that emerging client segment then — is it a smart strategy, or are too many advisors following the herd?
I think there’s some going with the herd frankly. The notion that the next generation is more self-initiated makes a lot of sense in the lower wealth segments, particularly in marketable securities, 401(k)s and everything else. It doesn’t make sense, though, in managing real estate investments, or seven-year, 10-year private equity investments. It’s a different problem. You invest so much in the decision to go to that long-term investment, monitoring it, and taking the ride.

A lot of the tools, it’s important to understand what the total wealth picture is. If it’s a mobile experience that someone can easily understand what changed from yesterday, last month or last quarter, that’s valuable. But I don’t know any of the principals in one of my families who are going to use their phones to move $100 million around. Teams of people decide to do that. I think advisors have the opportunity to use technology internally to do a better job for their families. But the families are not the consumer of the technology, unlike the lower wealth segments, where robo advice is targeting the actual wealth holder.