Gaining access to the family office

Private banks and wealth managers are more than ever eager to tap into the family office arena, where an increasing part of the world’s wealth is managed. The recent alliance between SG Private Banking, the global wealth management arm of France’s Société Genérale and US-based Rockefeller & Co, the $30bn (E19bn) independently owned firm which focuses on very wealthy families, is a clear evidence of this trend. The partnership, claimed to be a world first in the industry, aims to give the French bank access to the very wealthy North-American clients and Rockefeller a new range of investment solutions. But it is the international expansion the two companies have big hopes for. “This alliance is a springboard for Rockefeller to take around the world our good name and our expertise in the family office world,” stated James McDonald, president and CEO at Rockefeller & Co. By leveraging on SG’s 47 centres of wealth around the world, the alliance’s three primary geographical target areas will be Asia, the Middle East and Europe, he estimated, but Latin America also looks interesting. “The challenge in the family office arena is to remain an independent boutique, very focussed on each client,” he said. This partnership would permit Rockefeller to maintain its identity, culture and expertise but also to gain the investment expertise of a global organisation, particularly in the areas of structured products, derivatives and futures, which will become more and more important to the ultra high new worth part of the market, said Mr McDonald, as well as hedge funds. But does not open architecture enable any firm to offer any types of products from a selection of external partners? “There are so many relationships that you can manage as a company, especially as a boutique. I think there are greater efficiencies coming from a primary global relationship,” said Mr McDonald, describing Rockefeller’s broad offer open architecture and praising SG for bringing an outside auditor to certify the independency of its own private bank’s open architecture. “If we really want to target family offices, we have to offer a global solution,” said Daniel Truchi, global CEO at SG Private Banking. “Those clients are global and through this alliance we aim to gain significant market share in this segment.” SG Private Banking is, in fact, already offering investment and credit solutions, wealth planning and fiduciary services to family offices worldwide, said Mr Truchi. “But what we don’t have is the know-how that Rockefeller has developed in terms of consolidated reporting, analysis of performance, concierge services and asset management, including both financial and non financial assets,” he said . Meanwhile, industry consultants debate whether this quite unique partnership may be just a precursor to a full integration. Alois Pirker, senior analyst at consulting firm Aite Group, believes that this approach may allow the two firms “to test the relationship before tying the knot permanently”. The 37 per cent stake that the French firm has acquired in Rockefeller means they are serious about it, he stated. On the other side, a partnership is a low risk strategy which can be more easily undone.The cultural clash between the two business models is clear, said Mr Pirker. Family offices tend to be small, independent units, which are created to preserve members’ wealth. The objective of the traditional corporate private banking world is to increase assets under management, given that a large part of the private bankers’ compensation is fee-based. “Most private banks have difficulties convincing the top end of the market that they have a genuinely independent mindset that is led by the interest of the client rather than by the wish of the organisation to sell products,” stated Michael Maslinski, founder of Masklinki & Co. There are, though, some examples of Swiss privately-owned private banks, running family office departments, where the heritage of looking after the interest of the family owning the bank may give the base and the culture through which to extend that service to other clients, he said. The problem with most of these multi-client family offices is that, unlike global banks, they do not have enough international spread, as they operate in just one or two jurisdictions, said Mr Masklinki. However, independent family offices can, and do, offer global services through a variety of different banks and providers. They buy and arrange facilities, pull it all together and basically act for their clients, he said. According to a recent Merrill Lynch/Campden survey, the primary business objective goal of single family offices in Europe is “control and consolidation of family wealth,” closely followed by confidentiality. Most family offices provide investment related services using in-house resources, which indicates that investment management is perceived as a core competence and a major raison d’être.

James McDonald, president and CEO at Rockefeller & Co