Since being bought by Bank of Montreal’s Harris Bank in 2002, myCFO Inc. has lost clients, and Harris is not pushing products through the Redwood City, Calif., family-office service company.
Yet neither the bank nor the unit could be happier about the deal.
John Wunsch, myCFO’s president, admitted that what he calls the success of myCFO is a curious one. After Harris bought the company in November 2002, myCFO deliberately reduced its client roster, from 300 to 200 by 2003, and Mr. Wunsch said the total continues to shrink.
“It is probably going to seem a bit strange that this business is doing quite well and that we are doing it with fewer clients,” Mr. Wunsch said. He declined, however, to provide numbers for revenue or assets under advisement.
The company continues to generate assets by pairing its own high-tech focus with Harris Bank’s high-touch philosophy, he said. Effective cross-selling of both proprietary and nonproprietary products and services is the key to the puzzle, he said.
The Harris unit is increasing its assets under advisement and plans to grow organically into new offices nationwide, he added.
Harris’ myCFO offers “comprehensive family-office” services; Mr. Wunsch said that that is what the “CFO” in the company’s name stands for, though “most people think it stands for ‘chief financial officer.’ ”
These services include investment management, tax and estate planning, and philanthropic services. Mr. Wunsch said he is confident that by working closely with a small group of ultra-wealthy families myCFO can cross-sell additional services and sign up new customers through referrals.
When the company was started in 1999, it had a much different mission statement. Born in Silicon Valley, myCFO.com planned to supply online family-office services. “The company wanted to offer all of these services in a virtual setting,” Mr. Wunsch said, “but we all know that wealthy people want to have someone they can hold accountable.”
Mr. Wunsch said the company “grew like Topsy” in its first three years. It had more programmers than service providers, and the high-tech orientation had an appeal in that region. This emphasis gave Harris a strong technological foundation to build on, Mr. Wunsch said.
After Harris bought the company, Mr. Wunsch, who had been head of Harris’ private wealth group, took over as president. He said the bank had always worked closely with wealthy families and realized right away that the myCFO business needed to be more one-on-one.
The company now has 95 service providers who specialize in tax planning, investment management, accounting, insurance, financial planning, or philanthropy. Mr. Wunsch said this gives clients a team-based approach to family-office services.
Analysts said there is a lot of competition to manage assets for wealthy families.
“Most financial services firms offer an array of products and services for their wealthy customers; this is really a no-brainer,” said Burton Greenwald, a Philadelphia analyst. “This is a very, very crowded market.”
Mr. Wunsch acknowledged the competition but said many firms like to say they offer comprehensive wealth management when really their services are limited.
“The real key here is the comprehensive nature of what we are offering,” he said. “There is a difference between providing family-office services versus providing some services, and just putting them with some ancillary services.” Ultra-wealthy customers need a provider that is not just pushing products, he said.
“Most competitors see their family-office services unit as just another distribution channel for selling the parent company’s products,” he said. “Look at Bessemer Trust. They say they are offering family-office services, but they are really just pushing products. It is very restrictive.”
Bessemer Trust did not return phone calls seeking comment.
“Harris’ myCFO is not a distribution channel,” Mr. Wunsch said. “This is a stand-alone business unit with an open architecture approach.”
Mr. Wunsch said myCFO will look to expand steadily and deliberately. The company, which has sites in Atlanta, Denver, Seattle, San Francisco, Los Angeles, and Redwood City, Calif., could potentially open offices in Chicago — Harris’ headquarters city — and along the East Coast, but since a family office is not a retail business, most client meetings do not take place in an office, anyway.
“We go to their homes. We are certainly willing to go to their yachts, and we’ll meet with them wherever they are in the world,” he said. “This is a very high-touch, high-service business. We used these offices as jumping off points.”
The company is open to doing deals in order to grow, he said. This could mean buying smaller family-office service providers.
“Harris is open-minded about making acquisitions that make sense,” he said. “If we are in a particular location or if we are not in a particular location, we want to talk to the best service providers in that area in order to expand our capabilities in this business.”
Mr. Wunsch said that regardless of its growth myCFO will be a revenue-generating, independent unit of the bank. “Too many competitors see family-office services just as a sales channel, but this is a business in and of itself.”
