What is a Multi-Family Office?Enzo Caputo2021-09-22T20:54:13+02:00
What is a Family Office?
A family office can be a single-family office or a multi-family office.
A single-family office supports only one family and
A multi-family office supports a number of families.
A multi-family office can be any size and serve any number of families, ranging from a couple to a hundred or more. Some offices only accept clients with a minimum amount of wealth and others serve all families willing and able to pay the required fees. On this page we discuss what a multi-family office is and what you as client can expect from a multi-family office.
Read further or contact us now for more information about multi-family offices.
Multi-Family Office definition
You will not find a single definition of a family office in international financial literature. There is a wide range of definitions; some rather broad and others simple.
The Caputo & Partners definition of a multi-family office is:
A multi-family office is a privately controlled and commercially operated organisation which employs staff that offers support to a number of wealthy families with the organisation, management and maintenance of part or all of their assets, needs and wishes.
The Caputo & Partners definition is purposely a rather broad one, as not only do all the providers of multi-family office services differ strongly, but most families have different ideas and expectations about what a family office actually is and which services it should provide.
Multi-Family Office jurisdictions
A multi-family office is normally set up as a privately-owned company. Although it can be established anywhere in the world, you will find them primarily in Europe (mainly in Switzerland and London) and the United States of America. In the past few years, an increasing number of firms in Hong Kong and Singapore have also started providing these services.
A multi-family office can assist you with a wide range of services, but there are only a few that offer all the services you are looking for to safeguard and increase your wealth. So the key to success and satisfaction is to find the family office that matches exactly the services you want and need.
Multi-family offices either invest or monitor
A professional multi-family office offers services in wealth management and family support, but the core facilitation of almost all such offices is investment management. Providers can be divided in two main types – the ones that invest and the ones that monitor.
Invest: The family office decides, together with the family, on an investment strategy and is also responsible for executing this strategy.
Monitor: If the multi-family office is not executing the investment strategy itself, then a strategic asset allocation is defined, together with the family, to commission private banks, fund managers or independent asset managers to invest accordingly. The family office continuously monitors correct execution.
❝ Gain control by using a multi-family office ❞
For families it is important to decide from the start which of the two types is the preferred multi-family office model for them. In practice we see that only approximately 10%-15% of providers have adopted the pure monitoring model.
How can a family office further support you?
Services such as wealth planning, administration, asset consolidation, asset performance monitoring, philanthropic services, tax and legal services, trusteeship and risk management could be part of the offering. A family office could also facilitate the organisation of your travel arrangements, coordinate insurance solutions, manage your yacht, help you invest in private equity or manage real estate. Other services may be added according to your personal needs – keeping in mind that ultimately every service comes at a price.
All services are offered in-house, or the family office cooperates and coordinates with dedicated external partners. In this respect you should be aware that the way in which services are provided (internally or outsourced) can have a considerable effect on the actual cost and quality of the service and your overall service experience.
Read more about the variety of services offered by a family office.
Made to measure service
Ultimately it is you who decides how exactly the multi-family office should serve you and your family. The family office can invest your money or simply manage and monitor your relationship with the banks. All of the family’s assets can be managed or only a certain part, and the family office can be responsible for disbursement of payments to family members now and in the future.
A family office can also manage your corporate holding structure and your private investment structure and assist in setting up wealth protection or other wealth planning structures (e.g. family foundations or family trusts). In most cases, wealth management, wealth planning and safeguarding your assets for the next generation (risk management) are at the core of the services provided.
Focus on a specific type of family office service
Although multi-family offices are known to offer a wide range of services, in practice we clearly see that most tend to focus on one or just a few services. Some offices are, for example, strong in asset management, some in charity services and others in real estate management or private equity investments. Mostly the focus originates from the background of the founders of the multi-family office. It is, therefore, important for you to find the one family office with a focus on the services that matches your interests most.
Multi-family office categories
Diving into the subject in more detail, multi-family offices can be divided into three sub-categories:
The commercial multi-family office
The commercial multi-family office is a family office that is operated by the founders to make an operational profit. It is the most common type of multi-family office. It is sometimes also called a ‘multi-client family office’.
An estimated 95% of multi-family offices, wherever located, are commercial multi-family offices. Professionals, such as former bankers, trustees or lawyers are usually the ones initiating the establishment of a commercial multi-family office. They aim to provide an independent and holistic approach to managing your wealth and supporting you with all your other needs and wishes, while charging a fee.
A commercial multi-family office would normally have professionals with different educational backgrounds and experience cooperating under one roof. As these multi-family offices are commercially operated, they mostly aim to provide services to a considerable number of families.
Even when a single-family office opens its doors to other families, serving those families for a fee, we would consider that to be a commercial multi-family office.
The private multi-family office
The private multi-family office is one that manages the wealth of a limited number of affluent families and has been established jointly by these families, or has been initially established by one of these families and joined by other families at a later stage to share the costs. Sometimes this type of multi-family office is also referred to as a ‘closed’ family office.
The difference between a private multi-family office and a commercial multi-family office is the operating fees. The family office provides services without the actual objective of making a profit for the owner or the office management/staff.
For several reasons, private multi-family offices are rare. To start with, it is relatively difficult to find other likeminded families with approximately the same amount of wealth to jointly establish such an office. As different families have different needs, it can be difficult to decide which services should be provided and in which way. How should the costs be divided by the families, who will ultimately be responsible for the operations of the family office and how will that responsibility be compensated?
In practice, one primarily encounters some private investment companies operating as a private multi-family office. Sometimes a single-family office evolves into a private multi-family office. Finding a private multi-family office is extremely difficult, as these mainly operate under the radar and are, in most cases, not looking for additional families to join them (normally by invitation only).
The virtual multi-family office
The virtual multi-family office is a group of independent professionals that cooperate together, acting as if they are a multi-family office. It is a relatively new concept and very much a niche service.
Contrary to the commercial multi-family office, all these professionals are employed in their own firms, but advise families in a coordinated, holistic way, taking into account the expertise and input of the other professionals. One might best compare a virtual family office with a multi-family office that outsources all its services. A virtual family office always operates commercially.
Providers offering a professional virtual multi-family office are rare. Therefore, your challenge is to find such a provider and establish and coordinate this integrated advice, without you being the one that ultimately needs to coordinate and integrate everything yourself. One also needs to make allowances for a slower response time, considering the team is not under the same roof.
There are several benefits to the virtual multi-family office. The costs should be lower as there are few fixed costs (related to staff and facilities) due to the fact that the advisors operate their own firm as well as serving other clients as independent advisors. The team can also be formed or adapted according to the family’s needs, offering flexibility.
Multi-family office staff
The average staff of a multi-family office consists of investment managers/specialists and a number of administrative, tax and legal experts. Depending on the size, there can be as few as three employees or as many as a hundred or more. The average multi-family office in Switzerland employs around ten to twenty staff. Normally, a dedicated small team within the office will serve you permanently and this team will use certain internal and/or external specialists when needed.
The huge benefit of a multi-family office is that all these different advisors are working together for you under one roof. This results in close collaboration, short response/reaction times and the best possible results for you. You also benefit directly from the expertise the staff have gained while supporting other families.
Use of the title ‘family office’ is not protected
As there is an increasing number of affluent families all over the world, demand for family office services is growing accordingly. As a result, there are many parties, such as independent asset managers and former bankers, who state (e.g. on their websites) that they offer a wide range of multi-family office services, while in fact they are primarily offering independent asset management services.
❝ Everyone can freely state that they provide family office services ❞
Due to the fact that the use of ‘family office’ or ‘family officer’ as a title is (in almost all jurisdictions) not in any way regulated, almost anyone can freely state that he/she provides family office services. There are also numerous multi-family offices which, being connected to banks (as shareholders), are not independent. Wealthy families should, therefore, take the process of selecting a multi-family office very seriously.
What is a single-family office?
In theory, only a single-family office can offer you a more personalised service than a multi-family office. Setting up your own single-family office is the only way to get served by one. When establishing a single-family office, you need to recruit your own staff and the operational risk for the office is yours entirely. The benefit of this option, however, is that you have full control over the family office and the services provided are exactly those to fit your family’s needs. Read more about single-family offices.