Joining or helping to found a multi-family office is an opportunity that comes to a select few, and is usually a once-in-a-lifetime event. A financial stewardship and investment company dedicated to a few ultra-wealthy families’ financial growth and success can be an incredible responsibility for the individuals and families concerned. There are many factors to consider when choosing a multi-family office over a different investment strategy such as a traditional investment bank or a more exclusive single-family office.
A multi-family office can offer many of the benefits enjoyed by a single-family office, while avoiding many of the inconveniences of working with wealth management advisors not specifically dedicated to your unique goals.
Cost sharing
The exclusivity and privacy of a single family office is not quite as accessible if there are only a few members of the family with very large net worths (in the hundreds of millions). Since a single family office can cost more than one million dollars per year to operate, it is only useful if there are many family members with very large net worths who can cooperate to manage it. A multi-family office shares some of the administrative and building costs of the company over a larger pool of investors, allowing for lower overall overhead costs.
Additionally, a multi family office is often able to bring in new investors as new families join the office. A larger pool of money can lead to increased investment opportunities for all families in the office. However, this assumes that all families and individuals involved have similar enough financial goals to allow for the pooling of assets in this way.
Privacy and personalization
A traditional wealth management firm may work with hundreds or thousands of different clients. A multi-family office adds an extra layer of privacy and exclusivity to the family’s wealth management, and allows for a much lower client-to-employee ratio. This allows for greater personalization than a traditional investment advisor. Not only can the family closely monitor the performance of their investments, but they also have greater control over the banker or lead investor.
A dedicated team of financial advisors who are dedicated to the financial success of a family over multiple generations has another benefit. As wealth transfers to new generations, and younger family members become larger stakeholders in the family’s wealth, a multi-family office allows for continuity of service and generational financial advice that would otherwise be lost.
One point of contact
Another critical advantage of a multi-family office is that all the family’s financial and legal information is in one place. Instead of maintaining contact with a swarm of advisors in banks, accounting firms, lawyers’ offices, and more, all the financial and legal papers are filed in a single, confidential, streamlined location. The obvious benefit here is that it is a time efficiency, but it also helps increase cross-generational continuity of service.
Unbiased financial advice
The financial advisors in a multi-family office are totally dedicated to each individual’s and the overall family’s financial growth. They do not sell any financial products or instruments and their sole objective is the financial preservation and asset growth of the family to which they are assigned.
Disadvantages of a multi-family office
While the advantages of a multi-family office are many, it may not be the right choice for you and your family’s long-term financial goals. With a decision of this magnitude, you must weigh all your options carefully.
More expensive than a traditional wealth management firm
While a multi-family office is often more cost-efficient than a single-family office, it is still significantly more costly than the management fees for traditional financial advisors. If you are the only one, or one of a handful, in your family who has a very large net worth, you may not be able to collectively join a multi-family office. It may be better for you to consider a different wealth management strategy that is more geared to the individual than to the financial goals of an entire extended family.
Conflicting goals
Finally, joining the financial interests of two or more high net worth families into a single investment company is easier said than done. It can be difficult enough to get all members of a single family united enough financially to pool their wealth for greater investment opportunities and common financial goals. It takes a highly skilled advisor with a great deal of tact and professionalism to ensure that the financial preservation and growth goals of all parties involved are being met. Additionally, different families often have different ethics and convictions that can change how they wish their money invested. Bankers and financial advisors must be keenly aware of the needs and opinions of all parties to make a multi family office a financial success.
The multi family office is a blend of the exclusive single family office and the traditional wealth management models. While it may be more cost efficient to operate, the added levels of privacy and tact necessary to successfully blend multiple families’ financial goals make it a unique challenge to maintain for both bankers and clients.
