His name is Frank Terrelli. He is standing before a screen ablaze with a PowerPoint slide, his fingers spread and pressed against each other, carefully addressing an assembly of some of Americas’ smartest and most successful financial planners. David Dieslin from Fort Worth. Richard Lee from Dallas. Harold Evensky from Coral Gables. Ronald Roge from New York. Dennis Miller from Phoenix. What we’ve got here is a veritable Brain Trust for financial planning.
The occasion? The second Wealth Management Symposium sponsored by Undiscovered Managers, a Dallas mutual fund and research boutique whose prime mover, Mark Hurley, rocked the boat last year when he published a paper asserting that individual planners would soon be competing with, and perhaps overrun by, large financial service firms. A transformation would sweep the industry as large companies tried, quite literally, to capitalize on vast new wealth.
By Mr. Hurleys’ estimate, a client with $1 million of investment assets would bring $7,500 of gross revenue and a startling $5,000 of profit per year. That profit, in turn, would be worth $60,000 in new market capitalization for a publicly traded company— enough to create a financial services gold rush.
As Mr. Hurley sees it, the opportunity for market capitalization will pit large companies against the small, highly personal and idiosyncratic individual practices that have characterized financial planning in the past.
Mr. Terrelli, dressed in a black three-button suit that barely allows sight of the silver-gray silk tie, may be part of that transformation. With his black hair pulled back into a short ponytail, Mr. Terrelli looks like he and actor Steven Segal share the same tailor and barber.
The former accountant is telling the financial planners how myCFO.com will serve the very, very rich.
And just how much money should you have to be considered very rich?
Lots. As you may suspect from the parking jams of personal jets at airports, the new market for completely furnished, turn-key mansions, and the dismal clutter in yacht basins across America, the idea of “rich” is a rapidly moving target these days. Trillions in “new money” have shoved aside the quaint conceptions of wealth embodied by “old money.” Remember, “Semi-Affluent” is now defined as a net worth of $1 million to $10 million. (For a column on the new categories of wealth visit www.scottburns.com/991017SU.htm. To see where you rank for wealth, by age and percentile, visit www.scottburns.com/000604SU.htm)
“Technology will commoditize all those functions that people do that don’t bring value added…” Mr. Terrelli says. “…I firmly believe that the web and the Internet will change the way we live and work.”
His words echo what presenters from Fidelity, AXA, and American Express have said earlier about reaching clients with less money. Most of the skills that individual financial planners use will be trivialized by technology in the next two or three years. Online advisors like Financial Engines and others are automating the web to design portfolios for individuals with far less than $1 million.
Mr. Terrelli describes how the myCFO website will provide complete, segmented management of your finances so that the captain of your yacht (held in a corporation) will see all bills related to the yacht on his portion of your web service and approve them for payment. He won’t, however, have access to any other part of your financial picture. Similarly, the Executive Director of your personal foundation will do the same with bills for the foundation. Ditto your houses, investments, trusts, etc.
No one ever said being rich was simple.
My CFO, Mr. Terrelli says, will replace the traditional “family office.”
One of the planners asks who myCFO has in mind as customers? How wealthy should they be? And what will his firm charge?
Mr. Terrelli says that a net worth of $20 million is the minimum, with $50 million “ideal”, and that a client with a net worth of about $100 million would pay an annual fee of about $400,000 for the service.
The room suddenly bristles with raised eyebrows.
Does this mean anything for you and me?
Yes. Buy a larger mailbox now and avoid the rush later. While few will be solicited by myCFO, all of us can expect as many offers for wealth and asset management from financial service firms as we’ve had credit card offers from credit card companies.
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo: Pixabay
(c) Scott Burns, 2022