Understanding multi-family offices and their role in wealth management

By Ilias Georgopoulos, Global Head of Private & Institutional Asset Owners, and Alex Dean, Head of Private Wealth

Multi-family offices (MFOs) are specialised institutions that provide tailored end to end services to affluent families. They offer the same services as a traditional single family office (SFO), providing a complete outsourced solution for their clients’ financial and investment needs.

As the name suggests, multi-family offices provide wealth-related solutions for multiple families rather than just one, allowing each participating family to benefit from economies of scale. Their ultimate goal is to ensure the efficient and effective management and protection of wealth for the families they serve.

In this article, we’ll explore the history and evolution of the MFO into its current form as an alternative to private banks. We’ll also unpack the many benefits ultra-high-net-worth (UHNW) families can enjoy from participating in a multi-family office.

How MFOs have evolved

Most family offices begin as SFOs but expand over time as families share resources and grow together. The earliest family office, founded by the Rockefellers in 1882, still exists as a global MFO today, providing wealth management services to other families as well.

Historically, MFOs have transitioned from traditional wealth management practices to more involved experts, providing private asset management and co-investment opportunities. This shift reflects the growing complexity of managing vast wealth in the modern era, particularly as many UHNWIs seek to institutionalise their assets and investment strategies. The shift toward private assets has opened new avenues for co-investment, allowing families to share costs and leverage opportunities they could not access if working alone. Whilst family offices paired back their allocation to private equity (PE) during 2023, the UBS Global Family Report found that 41 per cent of family offices planned to increase direct deal allocations over five years.

The benefits of combined resources don’t end with investment opportunities. According to the 2023 UBS Global Family Office Report, smaller family offices are far more likely to fall short of best practices for succession planning and generational wealth transfer, while larger family offices with assets exceeding USD 1 billion are more likely to have a well-established succession plan and governance framework. This explains the increased popularity of MFOs as a way for UHNWs to protect their wealth.

What services do multi-family offices provide?

Unlike traditional wealth management firms, MFOs offer a comprehensive suite of services, ranging from investment advisory, reporting to succession and estate planning.

These services include:

• Wealth planning and management: Crafting strategies to preserve and grow wealth in line with larger family objectives.
• Investment advisory: Expert guidance on portfolio management, including allocations in private markets.
• Tax planning: Structuring wealth for maximum tax efficiency.
• Estate planning: Ensuring the orderly transfer of assets and addressing succession issues.
• Risk management: Identifying and mitigating financial risks.

MFOs also compete with private banks by offering highly personalised services. They tailor their offerings to the unique needs of the families they serve, focusing on providing access to exclusive opportunities and creating bespoke investment solutions.

The benefits of using a multi-family office

Efficiency and cost-effectiveness

MFOs present a cost-effective solution for wealthy families by allowing them to pool their resources and leverage economies of scale. This collective approach leads to significant cost savings, streamlined financial processes, and direct access to high-conviction private market investments through private equity or multi-asset class funds.

Expertise and specialisation

MFOs provide access to a team of financial experts, each specialising in different domains. This expertise is particularly beneficial for managing complex financial matters and ensuring personalised service – a marked improvement over the often high turnover of relationship managers in private banks.

Comprehensive wealth management

The holistic approach of MFOs integrates various aspects of familial finance, ranging from investment strategies to family values and aiming for wealth preservation and growth. This comprehensive suite of services ensures that all financial activities align with each family’s long-term objectives.

Technology

With MFOs, families can leverage on their technologies to gain access to sophisticated digital platforms that offer comprehensive insights into their investments, allowing for informed decision-making and portfolio management

Governance

MFOs assist families in setting up a comprehensive governance frameworks tailored to their unique needs and objectives. This includes establishing clear decision-making processes, defining roles and responsibilities within the family, and implementing effective communication channels. MFOs will support families in facilitating transparency, accountability, and alignment among family members.

How IQ-EQ can support MFOs

In today’s dynamic financial landscape, multi-family offices encounter a spectrum of obstacles, ranging from mounting global regulations to the pressing need for advanced digital solutions and the intricacies of modern investment landscapes, particularly within private markets.

IQ-EQ understands the many challenges facing MFOs and that satisfying the demands of key stakeholders, be they clients or the regulatory authorities, requires significant fixed investment, time and expertise. We have developed an offering to provide an efficient and specific set of solutions for MFOs which focuses on governance, funds and trusts services, and support in the setting up of domestic and international corporate structures and SPVs. Contact us today to find out more.