A common phrase in the family office industry goes like this: “If you’ve seen one family office, you’ve seen one family office.”
So, applying one model to multiple families is unlikely to work: It is by its very nature a bespoke business that requires thoughtful consideration of circumstances and desire.
For a large portion of the ‘moderately, very wealthy, however,’ the single-family office is an expensive and inefficient use of resources. That is where the multi-family office model comes in: One centralized organization spreading the cost across many families. (AlTi Tiedemann Global and Campden Wealth, which surveyed nearly 100 single-family offices, found that the average operational cost (excluding investment-related fees paid to third-party managers) was $5.2 million. Of course, costs vary according to size and need.)
Increasingly, families are demanding a hybrid between a single-family office and a multi-family office. These families are not quite wealthy enough for a SFO, but they have expectations beyond the capabilities of an MFO.
“If you are client 99 at a huge $50 billion RIA are you really getting that level of high touch? Are they answering the phone in six seconds?,” said one family office source.
The desire for family office services in general and institutional-style investing has grown alongside complexity in estate and tax planning and philanthropy.
Joe Quinan, head of family office services at PNC Private Bank, said: “You’re going to have the multibillion-dollar families with a staff of 50 or 60 people because they have the resources to do that. But when you start getting a little down market there are plenty of families that are looking for a different solution, a hybrid approach to their family office that makes sense for them.”
San Francisco-based Roberston Stephens recently launched a family office arm specifically for this class of client. “Those complex, sophisticated clients that have outgrown what a traditional multifamily office RIA can offer need somewhere to go. They have unmet needs that we want to solve,” said Raj Bhattacharyya, CEO. “What we want to do is to bring the single-family office experience to those families.”
Bhattacharyya said Robertson Stephens is doing that by offering what they call a “fractional family office” model. The model primarily addresses what a family needs beyond investments.
Five Eleven Partners recently launched a similar hybrid model. Andrew Crofton, CEO and founder, said that the need for this type of service has grown as families invest more in private markets.
For Crofton, working with the right families is crucial, especially in the early stages. “We have to be very selective about our families, our business model and the team. The first line of defense is making sure that the families that we bring in actually need our services.”
The firm will avoid acquiring other wealth managers and growing clients in the way MFOs tend to. Crofton said that managing the wealth of around twenty clients will allow them to maintain this best of both offering.
“We won’t know exactly until we hit the threshold, the minute we get near the line that a client experience is being diluted or tested beyond what we intended is when we have hit the scale.”
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