Firm Profile: Working With Families And Their Businesses

Harriet Davies Editor - Family Wealth Report 10 May 2011

Firm Profile: Working With Families And Their Businesses

Pactolus Private Wealth Management, a relatively new firm on the wealth management block, works for the most part with families where the family business is still a big part of their assets. And the firm has ambitious plans that include the European and Asia-Pacific markets.

Pactolus Private Wealth Management, a relatively new firm on the wealth management block, has carved out a clearly defined niche for itself: it works for the most part with families where the family business is still a big part of their assets, Alan Harter, managing director, tells Family Wealth Report. And the firm has ambitious plans that include the European and Asia-Pacific markets.

The family business

Pactolus’ services breach the family/business divide: as well as its personal wealth offering, it advises on the family business, such as evaluating whether it is best to sell or keep the business at a given time, and assuming responsibility for the business’s balance sheet. As such, it has by design targeted wealth creators as clients as opposed to those with inherited wealth.

However, any successful private wealth firm that claims an intimacy with its client-families would surely hope to keep clients over generations. Inevitably the nature of the wealth will change, and the family business will likely be sold sooner or later.

Harter agrees, but says the important thing is to work with a family from the beginning, and thus when the generational and liquidity issues arise they can be involved from early on with the process, rather than inheriting them from predecessor firms.


Harter himself started out in the retail arm of Merrill Lynch, in the euphoric atmosphere of Silicon Valley in the 1990s. He later moved to the East Cost to Wachovia, prior to the firm’s merger, and that’s where he got involved in the ultra high net worth space. After this he moved to Smith Barney, working for Citi’s Family Office practice, where he experienced the turmoil of the financial crisis.

He says he has had direct experiences of clients approaching their advisory team saying they wanted to move out of the environment of a large, diverse financial institution.

Following the lessons learned about client experience during the crisis, it took two years to craft Pactolus, which now serves 27 core client-families. As well as providing families with private wealth and business advisory services, it is also positioning itself as a network, where clients can share and communicate ideas and business opportunities with each other.

Many networks such as FOX, IPI and Tiger 21 provide these kinds of closed-door, discrete forums for the ultra wealthy, and the firm sees an opportunity in tying up these benefits with wealth management services.

“An advisor won’t necessarily have the direct experience of the challenges facing an ultra-wealthy family, so if you can create an environment where you provide the  catalyst for them to speak to one another, the conversation can quickly move from business to personal.   In many cases it is just a function of bringing the right people together,” says Harter.

An example of this is a series of events the firm is planning, where the families will drive the discussions. The firm will then help populate the agenda and bring in other relevant client-families, who have similar business, investment or personal interests. Especially for families still actively involved in their businesses, such networking can be very fruitful, says Harter. 

“If families can get to know each other it often leads to the creation of an environment where doing business together comes very naturally,” he says.

The firm is also keen to establish a strong philanthropic footprint, and runs its own activities as well as working with clients to compound the donations it makes. Harter says proactively engaging with clients on philanthropy can help solve other complex issues, such as how to engage and instill values about money in the younger generation.

Competition and fees

It’s no easy task competing with the many large firms out there though, and Harter acknowledges that the main challenge facing independents is the lack of capital – financial as well as human. While independent firms sell themselves on being objective, the lack of human capital to provide due diligence on investments can limit the portfolio. For this reason it has a relationship with Dynasty Financial Partners, through which it can access investment, reporting and advisory services.

Fees depend on the service offered, explains Harter, but it is usually on an assets under management basis, while the business balance sheet mandate charges a flat fee. The investment management costs are passed through to the client, Harter says, so there is transparency in this area.

This point about interests – or conflicts of them – has shaken the wealth management world over the last few years. The firm aims to align its interest with those of the client, such as by taking an equity interest when advising on a management buyout, according to Harter.

In fact, he sees parts of the industry moving back towards the partnership model, as sophisticated families understand and are wary of the model where employees have no ownership interest.

“The advisory team has to be more closely aligned with the family’s interests. The way our firm is structured means families are both partners and clients,” he tells FWR.

“By doing so we have purposefully put ourselves in a position where we are not for sale,” he says, adding that this means clients understand this is a long-term business that isn’t about building up to a certain size and selling.

The future

The firm currently has offices in New York and Washington, DC, but is setting its goal at around 10 offices globally, and aims with time to expand into the key financial cities in Europe and Asia-Pacific.

“Families have reached out and are willing to sponsor us to go into Southeast Asia – they want Western asset managers but they also want to be able to partner with families internationally,” says Harter.

Pactolus aims to achieve this growth within around seven years, and for this to be largely organic due to the difficulties associated with integrating cultures. However, he says if there was a firm with the right kind of clients and a close cultural fit, an acquisition would also be a possibility.


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