Still a relatively small part of the financial landscape in the UK, Europe and the US, multi-family offices have plenty of room to expand as the ranks of the worlds super-rich increase, notwithstanding current economic woes, managers at these companies recently told WealthBriefing.
Nobody has really gone for the global route but I dont see why you should not, William Drake, co-founder of Lord North Street, a multi-family office focusing on investment, said.
We have about 20 families [in Lord North Street]. Unlike single family offices, we get variety in the types of families that we have. We have all kinds: old money, new money and everything in between, he said. There is no pre-determined capacity constraint on multi family offices in terms of the number of family clients they can take on before becoming just another big investment house. That [capacity] is something that is to be discovered. In America, there are some huge multi family offices and they are run very well, he said.
There are actual advantages to being a big player, Mr Drake said. He argues that London, a cosmopolitan financial hub experienced in handling wealthy clients from across the world, was ideally placed to provide examples of multi-family offices with global reach.
There is already evidence that multi-family offices can be large and operate cross-border beyond their home turf. Take the case of Fleming Family & Partners, the institution set up to manage the wealth of the Fleming dynasty after Robert Fleming was sold to US bank Chase Manhattan in August 2000. FF&P is not just a UK player: it opened offices in Hong Kong two years ago and also has offices in centres including Zurich, Singapore and Vaduz.
Some of these institutions have a very wide footprint. The Guggenheim Family Office, part of Guggenheim Partners, a product of the Guggenheim dynasty in the US, has offices around the world, including London, Hong Kong, Dublin, Geneva, Los Angeles and New York.
In fact, the example of the US multi-family office sector there are about 120 of them in the US alone gives plenty of reason for thinking that the UK market, which is very young, can expand hugely, Mr Drake said. We [the MFO industry] are a young teenager and there is a long way for this industry to go. The forces that are pushing us forward are inexorable. You have got in these families a desire for independence in their advisors, he said.
FF&P agrees and says the international model of a multi-family office can work so long as it has professional staff able to deal with a broad variety of clients. Our model works internationally because we have very experienced client teams in place in the regions, said Penny Lovell, who is responsible business development at FF&P.
Not all multi-family offices think that it is easy or even possible to successfully operate with clients from different countries and retain the close connections with clients that are key to making such business work. Alexander Scott, chairman of UK-based Sand Aire, told WealthBriefing that getting such cross-border development is hard. I dont think that any such businesses have been successful, he said.
But Mr Scott is confident these offices can continue to expand, although he points out that there remain barriers to entry in setting up such operations.
A family has to be willing to put capital in so that other clients can come in. People can either build it [multi-family office] themselves or find a supportive institution, Mr Scott said, using the example of the Bessemer Trust, which has a strong business relationship with Stanhope Capital, a multi-family office in the UK.
I thought that the idea of moving from a single family office to a multi-family office was pretty interesting, he said, likening the idea to that of fractional ownership of private jets, in which people can share the cost of running a high-end service.
Sand Aire has been open to outside families since 2002 and it now caters for 17 families and employs 25 members of staff.
Some costs, such as IT and systems support, have fallen. However, the cost of finding suitable offices has risen in recent years, Mr Scott said.
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Date Published :
Dec 10 2008