What You Need to Know About the Growth of Multi-Family Offices
What is a Multi-Family Office, exactly?
Lawyers, accountants, investment managers, and other experts have long been a part of the financial management teams entrusted to wealthy families. The multi-family office, however, is a brand-new sort of organization that has evolved recently to meet the specific demands of these families.
A multi-family office is a business that offers professional financial services and guidance to a number of rich families. Multifamily offices combine resources to provide services to numerous families, in contrast to traditional single-family offices, which are normally established by a single family to manage their wealth.
Trends and Data Relating to the Increase of Multi-Family Offices
In recent years, a number of reasons have contributed to the multi-family office industry's fast growth. According to a survey by Campden Wealth and UBS, the average size of a multi-family office climbed along with a 15% growth in the number of multi-family offices globally between 2016 and 2018.
The difficulty of managing wealth in a financial environment that is continually evolving is one of the major factors contributing to this rise. Rich families confront a variety of concerns, including managing assets, estate planning, and tax optimization, and they frequently need a team of specialists with specific knowledge to assist them in resolving these problems.
Reasons Why Rich Families are Considering Multi-Family Offices
Rich families may find multi-family offices to be a desirable alternative due to their numerous important advantages. Some advantages include:
- Savings: A multi-family office can provide economies of scale by combining resources with other families, lowering costs for each family.
- Access to knowledge: Multi-family offices frequently employ specialists with a wide variety of knowledge, including investment management, tax planning, legal services, and more. In comparison to what they may be able accomplish on their own, families can now access a wider selection of resources and expertise.
- Customization: As compared to standard wealth management companies, multi-family offices may customise their services to the unique needs and objectives of each family.
- Family governance: Multi-family offices may assist families in creating and maintaining strong governance structures, such as family trusts or councils, to make sure that money is handled wisely through generations.
Selecting a Multi-Family Office: Hazards and Issues to Consider
Although multi-family workplaces provide numerous advantages, there are also certain difficulties and concerns that families should be aware of. They comprise:
- Conflicts of interest: When multifamily offices manage the assets of many families, they may come into conflict with those families' opposing objectives or aspirations. Families need to make sure their goals are compatible with those of the multi-family office.
- Loss of control: Because they are combining their assets with those of other families, families working with a multi-family office could have less control over their holdings. Families should be given as much information as possible about how their assets are being managed and how much influence they will have.
- Cybersecurity: Multifamily offices may be vulnerable to cyberattacks, which might compromise sensitive financial information, just like any other financial institution. The multifamily office should have reliable cybersecurity measures in place, according to families.
Tips & Techniques for Selecting the Best Multi-Family Office
Although selecting the best multi-family office might be challenging, there are numerous important considerations that families should take into account. They comprise:
- Services provided: Families should think about the services they require and make sure the multi-family office has the know-how to satisfy those requirements.
- Reputation and track record: Families should look into the reputation and history of any multi-family offices they are thinking about, including customer reviews and case studies.
- Fees and expenses: Families should carefully assess the fees and expenses — including any additional or hidden costs — involved in dealing with a multi-family office.
- Cultural fit: Families should make sure that their beliefs and aspirations are in line with those of the multi-family office.
Case Studies: Examples of Multi-Family Offices in the Real World
Examining examples from the real world might help you comprehend how multi-family workplaces operate in practice. Multi-family offices with a good reputation include:
- One of the first multi-family offices in the US, The Pitcairn Company was established in 1923 and currently serves over 100 families and oversees over $5 billion in assets.
- First established as the family office of the Rockefellers, Rockefeller Capital Management currently provides wealth management, wealth planning, and family governance services to a wide spectrum of rich families and individuals.
- Bessemer Trust: A multi-family firm that offers full wealth management services to high-net-worth individuals and families, Bessemer Trust was founded in 1907. Almost $140 billion in assets are managed by the company.
What to Anticipate in the Next Decades Regarding Multi-Family Offices
Going ahead, it is certain that the multifamily office sector will keep expanding and developing in response to shifting client demands and market trends. Some significant trends to look out for are:
- Expansion into developing countries: Multi-family offices are projected to increase their service offerings in response to the growing wealth accumulation in emerging economies like Asia and the Middle East.
- Increasing use of technology: To enhance their offerings and streamline operations, multi-family offices are expected to leverage technologies like blockchain and artificial intelligence (AI) more frequently.
- Multi-family offices may concentrate on certain niches or areas of expertise, such as impact investment or charity, as the demands of affluent families become more specialized.
A fundamental change in the way affluent families handle their wealth has been brought about by the growth of multi-family offices. Families may save money, customize their lives, and practice efficient family governance by pooling their resources and gaining access to a wide range of knowledge. However, before to making a choice, families should carefully weigh their alternatives and be aware of the dangers and obstacles involved with working with a multi-family practice.