More mergers between multi-family offices are to be expected as firms look to comply with regulation and embrace technology
The transatlantic merger agreed between US-based FWM Holdings and Europe’s Stanhope Capital will create what they claim is “one of the world’s largest independent wealth management and advisory firms”, overseeing $24.2bn in client assets. FWM already owns multi-family offices (MFOs) Forbes Family Trust and LGL Partners, in addition to hedge fund specialist Optima Fund Management.
The deal, described by FWM founder Keith Bloomfield as “perhaps the first” of this size in the UHNW space, comes at a time when independent players are increasingly joining forces to build much-needed scale and compete with private banks in serving the growing ranks of wealthy families.
Both businesses have grown solidly for 10 years. The combined firm aims to further gain market share by offering global wealthy families conflict-free advice and bespoke portfolios, as well as alignment of interest between clients and professionals, who invest their personal wealth alongside them.
Shared vision
The firms’ leaders claim to share “vision, philosophy and chemistry.” They also say they are motivated by the desire to offer clients a greater number of “quality investment opportunities”, in both public and private markets, and expand the business’s global reach.
“Enhanced resources, boots on the ground in many more financial centres globally, makes a stronger firm for our clients, both in the US and outside the US,” says Mr Bloomfield, who will continue as CEO of FWM, responsible for running the firm’s US businesses. Daniel Pinto, co-founder of London-based Stanhope Capital, which also has offices in Geneva and Paris, will be the chairman and CEO of the combined group.
Greater scale will also enable the group to negotiate better fees for clients, states Mr Bloomfield.
Mergers usually occur to gain efficiencies of scale, add fresh capital for investment, or complement one firm’s skill with another’s, explains Gerard Aquilina, partner at family advisers Cone Marshall. With the proliferation of MFOs over the past 20 years, the cost to acquire and retain skilled professionals, comply with regulation and invest in technology will lead to more mergers, he believes.
MFO cross-border mergers, however, are “more of a challenge” because of potentially different regulatory and cultural environments.
While an MFO generally provides a range of services, its most profitable source of revenue is investment advisory. This explains why many MFOs are simply portfolio management firms by any other name. “It is mainly in the investment management space that these MFOs want to compete with banks,” with expertise in private equity and real estate being an additional bonus, adds Mr Aquilina.
The key area where banks have a competitive advantage is in new client development, with their access to cross-selling referrals from other divisions. MFOs, on the other hand, are more narrowly focused, their strength lying in being “singularly focused on investing and planning”, states Bill Sullivan, president, Family Office Exchange.
“To gain market share, MFOs need to look more innovative, more nimble, and have better access to unique investments, while delivering a better client service,” he says.
All players, be they private banks or MFOs, are under incredible pressure to expand digital capabilities, with Covid increasing this sense of urgency. Today’s conversations with MFOs typically focus on innovation and new technology adoption, reports Mr Sullivan. Availability of more advanced software has allowed leading MFOs to increasingly set the pace against the banks, often held back by legacy technology and bureaucracy.
