Multi-family offices must broaden expertise
Multi-family offices need to widen the range of services they offer clients, be it in-house or through strategic partnerships, if they are to grow to their full potential
In the aftermath of the financial crisis and banking scandals many wealthy families have spread their risk over several institutions. The desire to receive independent and objective advice has driven them to add multi-family offices (MFOs) to their list of providers.
Often MFOs are given the role of coordinating other institutions, as one of the value propositions they offer is “comprehensive reporting and the ability to provide a holistic view of the portfolio”, states Michel Abouchalache, CEO of international MFO Quilvest Group. The firm, which has served seven generations of the Bemberg family, runs more than €25bn in assets under management.
Many of these MFOs, which claim to offer customised services and solutions and alignment of interest with their clients, tend to specialise in particular areas of the family business. Investment services, with a focus on alternatives, mainly in direct investment opportunities, are the most common.
“What makes UHNW individuals tick are direct investments, specifically in private equity and real estate, rather than funds, as they can relate to them,” says Mr Abouchalache. Investments can become “the highest margin and most exciting business” for a MFO, and clients as well, but it is key to build and sustain a good track record, he says.
When that is achieved and the “performance fees kick in,” then it definitely becomes profitable. “MFOs tend to be small, they are transparent and their track record becomes extremely important, you live and die by it,” says Mr Abouchalache.
Most of the MFOs are far too small, located in far too few jurisdictions and not big enough to offer the level of expertise required to serve wealthy international families with multiple business interests, in an increasingly complex regulatory environment
The issue with so-called MFOs is that often they are just investment boutiques, but for most wealthy families the investment portfolio is just a small part of their assets, observes Michael Maslinski, director at consultancy Maslinski & Co.
“Most of the MFOs are far too small, located in far too few jurisdictions and not big enough to offer the level of expertise required to serve wealthy international families with multiple business interests, in an increasingly complex regulatory environment.”
There is plenty of profit in many areas of the family office space, but in order to make that profit, MFOs need to be much more effective in delivering solutions across the whole range of clients’ affairs and become their genuine trusted adviser.
The ability to manage risk across the whole of the family affairs “is scarcely being touched by MFOs today, because for most of them it is just too difficult,” says Mr Maslinski.
MFOs do not need to provide all services in-house, but it is important they establish strategic partnerships with selected external providers and then have the knowledge and understanding to be able to obtain the specific advice they need to serve families across all jurisdictions.
MFOs have their biggest growth opportunity today, believes Mr Maslinski, but it will be a slow process, as it requires investment and acquisition of expertise.
