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Pitcairn And Predicament Of The Mid-Sized MFO

Charles Paikert

9 October 2023

In the turbo-charged and hyper-competitive mass affluent and high net worth RIA space, significant year-over-year growth is imperative. In the more sedate and collegial ultra-high net worth and family office market, just keeping pace with changing times, friendly rivals and client demands is hard enough.

The recent change in leadership at Pitcairn epitomizes the predicament of well-established, mid-sized multi-family offices with assets under $10 billion. Like a number of similar operations, Pitcairn has a long history rooted in a dominant founding family, very wealthy clients and a reputation for high-touch service and discretion.

Accelerating growth and profit margins are not priorities for Pitcairn’s new chief executive, Andy Busser, the president of the MFO for the past two years. “Investing in outstanding client experience is my highest priority,” Busser told Family Wealth Report. “That’s been the heart of the firm for one hundred years. My other top priorities are investing in talent and technology.”

Growth issues
Pitcairn aims to grow “responsibly,” Busser said, adding three to five new families a year. Minimum investible assets for new clients is $25 million, according to Busser. The average new client has between $80 million and $100 million in investible assets and many long-time clients have much more, he said.

Although acquisitions are not high on Pitcairn’s agenda, Busser said he would consider buying “a great firm that’s a great cultural fit.” And because Pitcairn has no outside investors, no exit strategy and an “infinite” time horizon, Busser maintained, “profitability is not a top priority for us. I’d rather invest in client experience.”

Industry consultant Brian Hughes questioned whether an inorganic growth strategy is sustainable for a mid-sized firm like Pitcairn: “Are they leveraging their relationship capital in a way that ensures their pipeline of opportunities continues to grow, or are they relying on old methods to bring in new business?” 

To reach $10 billion in assets organically, Pitcairn “will have to do something different,” Hughes argued.

Succession questions
Busser will be succeeding Leslie Voth, a highly respected industry executive who has been with Pitcairn for three decades, 11 as chief executive. 

“Leslie’s shoes will be very hard to fill,” said Hughes, noting that Voth “transformed Pitcairn from a sleepy trust company to a thriving multifamily office.”  

Busser’s challenge “will be taking Pitcairn to the next level while maintaining its distinctive culture,” said long-time UHNW consultant Jamie McLaughlin. In a marketplace “awash in private equity capital,” asked Joseph Reilly, CEO of the Circulus Group, “how does Pitcairn stay independent?”

“Eroding” MFO margins?
Despite Busser’s disclaimer, Hughes and McLaughlin both noted that profitability is very much an issue for mid-sized multifamily offices.

“Every firm serving the UHNW client segment is adding non-revenue bearing C-level infrastructure,” McLaughlin said. “Those people are expensive and impede operating leverage but they’re essential.” Indeed, “erosion of profitability” has been a “struggle” for MFOs as they add more staff when more families become clients, Hughes observed. 

And despite the relative collegiality among established MFOs, they still face plenty of competition.

While the Pitcairns of the world may be part of a “select group of top-tier firms renowned for their expertise,” they also have relatively low profiles, according to Reilly, leading many prospective clients “to opt for global banks.”

McLaughlin, a co-founder of the UHNW Institute, calculated that Pitcairn “competes with a category of about 50 firms, mostly RIAs and a handful of trust companies.” Busser believes that Pitcairn’s competition is double that number and “all over the place,” including money center private banks, local RIAs and “other well-established family offices.”

Busser’s odds
Pitcairn has “the same issues facing every firm out there: brand and technology,” Reilly said. The MFO has “a major advantage with Busser, who is a strategic thinker,” he asserted.

Pitcairn’s stellar brand has, in fact, helped the firm recruit top talent in an era when it has been in short supply, according to Busser. Being located in the Philadelphia market and not having to compete directly with New York City firms has also been a factor, he said. 

And when it comes to technology, investing in upgrades such as CRM software and the client portal dovetails with the firm’s emphasis on client experience, Busser said. While technology in wealth management “started as a way to be more efficient on the backend,” he explained, “it has now become an integrated part of the client experience on the front end.”

Pitcairn, like other multifamily offices its size, will also have to keep a close eye on capital funding and pricing, McLaughlin said. But he believes thatBusser is up to the job: “He’s very smart. What he doesn’t know, he’ll figure out.”

Note: Among recent C-suite changes, in January 2023 Pitcairn recruited Nathan Sonnenberg as its new chief investment officer. He took the helm from Rick Pitcairn.