Taking over a family business and living up to the challenges of older generations is a challenge for heirs, but it is one that Jonathan Crystal, of Frank Crystal & Company, has excelled in.

Taking over a family business and living up to the challenges of older generations is a challenge for heirs, but it is one that Jonathan Crystal, of Frank Crystal & Company, has excelled in.

“My grandfather founded the firm… My father built the firm, and the challenge for my brothers and me is to build on that legacy,” says Crystal, executive vice president at the firm and head of its Private Client Services group.

He didn’t take a passive approach to his inheritance though, instead looking for ways to expand the privately-held insurance brokerage into new channels.

Frank Crystal is a full-service brokerage firm with a heritage working with financial services firms, with many clients in the hedge fund community, for example. Ten years ago it had a small division serving senior corporate executives.

“It was relatively immaterial from a revenue standpoint,” says Crystal. But he and other senior managers realized “there was an opportunity to develop a private-banking type experience within the insurance industry.” The firm’s history lent itself to this: “Our heritage in serving financial institutions informs our practice serving affluent families. Expectations for service, results, and quality are extraordinarily high.”

Over the past ten years, the Private Client Services group has grown from a staff of 15 to 65, serving around 5,000 individuals and families, including 18 members of the Forbes 400. Its average annual growth rate over the period has been around 12 per cent.

His strategy to achieve this growth? “Our people are our most critical asset,” says Crystal. He worked with a policy where new hires to the firm had to be highly experienced, with senior managers each bringing “in excess of twenty years of professional experience to the table.”

Meanwhile, the firm sought to bring “new energy to the industry,” investing resources to train and develop new professionals internally. “We made a concerted effort to invest in this segment,” said Crystal.

First-hand experience

Heritage has shaped the firm in other ways. Crystal’s experience of being a third-generation member of a business-owning family affects the way he views multi-generational client families.

“One of the things I take from this background is thinking about the ‘Next Gen’,” he says. Younger family members can be “a nexus of risk,” he explains, due to their stage of life and their lifestyles, and to protect the family it is essential to focus on this in the insurance process.

It also gave him an understanding of family dynamics and the complexities of family relationships, such as the fact certain family members sometimes work with different advisors - and the necessity of delving into these matters.

The PCS Group decided from the beginning to focus on the super rich, but it defines ultra high net worth clients “not by their net worth, but rather by how complex their lifestyle is.” Factors such as art investment, yacht, plane or multiple home ownership all increase insurance needs greatly.

“Their risk profile doesn’t necessarily tie directly to their liquid net worth,” he explains.

Start with complexity

When it comes to UHNW clients, what’s the most important thing to address? “The number one place to start is complexity,” says Crystal. “They have often structured their wealth in a complex way… so what they seek is simplicity – administrative simplicity, a bit of control.”

He encounters families with “dozens of insurance policies” from “multiple insurance companies.” In these cases, the firm’s job is to “reformulate [the family’s] approach” to simplify and reduce spend.

Another top issue the firm deals with is clients’ concerns over personal security, which run “much deeper” than concern for their assets. This means preparing for risks when travelling abroad, for example.

“Another broader trend that we see is the globalization of families and their wealth,” says Crystal. This has led the firm to establish a global wealth unit to deal with transnational families.

Meanwhile, the heightened scrutiny of wealth in the media causes issues for some. “There’s two related issues going on,” explains Crystal. One is that with returns from liquid assets so low “clients are investing in hard assets” as “at least they have some intrinsic value.” This brings challenges of its own, such as transportation and storage. But it also can raise an individual’s profile - if someone is identified as the buyer of an extremely pricey piece of art or high-profile property, for example.

This, for many, will be unwanted. To aid clients with such issues the firm delves into the minutiae such as finding out whether they are acquiring assets through LLCs, and how it can help protect these. Tangible assets such as houses create other vulnerabilities: who is handling the build and project management?

Crystal is no doomsayer though. He does not bring up all these angles to suggest all wealthy people should avoid all risk through insurance.

“We have no problem with clients taking risks,” he says, pointing out that many of the firm’s clients are hedge funds, which make a living from managing financial risk. However, all clients need to understand the risks inherent in their lifestyles and be able to absorb the risks they take, and understand the alternative costs of insuring against that risk. It needs to be “conscious risk,” he explains, which is very different from an oversight. 

Advice to wealth managers

For wealth managers looking to discuss clients’ insurance needs, Crystal says that firstly it’s important to go beyond liquid assets: “We recommend they look more broadly at the balance sheet. Art can be upwards of 10, 20 or 30 per cent of net worth…It should be part of the mandate of a wealth advisor.”

Secondly, on understanding your client’s insurance profile, he says questions need to go deeper than “Do you have insurance?” and “Are you happy with it?”

“Your clients are reviewing their investments on a quarterly basis” at least, says Crystal, while he finds people who haven’t reviewed their insurance policies for “15 or 20 years.”