70% of Multi Family Offices surveyed serviced fewer than 100 clients, with 40% of the offices servicing between 50-100 clients and 30% servicing between 0-50 clients. Only 30% of MFOs serviced over 100 clients. Though a multi-family office (MFO) can benefit from economies of scale, we can see from this spread that there is still a trend towards bespoke partnerships and alliances. MFO’s as such need to strike the balance between a broad client base through which they can leverage learnings, and a selected client base where trust and relationships are fundamental.
A regional focus for investments
Through the survey, we found that Multi Family Offices mostly worked with clients in the same region – specifically in the United States. Those who did have a wider geographic spread maintained a regional focus – ie. US-based MFOs working with Central and South American clients and Asia based MFOs working with Eastern European families.
In terms of investments, however, families are working globally on one level or another. Whether it is an Asian family investing in an American listed equity such as Apple, or a Scandinavian family choosing to directly fund an impact startup in South America, business is increasingly happening internationally. A multi-family office (MFO) that is able to support this cross-border activity will have an advantage of remaining in the trusted partner position.
Few serve the ultra UHNW individuals
The average client wealth of the Multi Family Offices ranged between $20m per family and over $100m per family. 50% worked with clients with an average wealth of $20m, 30% with wealth ranging between $50m and $100 and 10% work with the high-range clients. 10% did not disclose the average wealth of their clients. The vast majority of respondents managed at least 75% of the wealth in question, with more than 50% managing this entire wealth.
The highest concentration of MFOs as such can be found within a historically underserved segment –the sub-$100m category. As a new influx of wealth owners enter the market, we can see a diversification of wealth categories.
The new-nouveau riche
Around 70% of those respondents stated that their clients are first-generation entrepreneurs, with around 30% stating that the reason for setting up a multi-family office was due to an exit from a multi-generational family business.
There are many well-known family offices that service multi-generational families. It is worth noting, therefore, that the Multi Family Offices who participated in this survey, are largely indicative of this new wave of wealth and not representative of the whole market.
Whether clients are multi-generational families or the new-nouveau riche, a multi-family office (MFO) has the opportunity to better tailor their services to the segment they primarily serve. For example, it would usually be the case that succession-related services are more in demand for multi-generational clients, whereas for tech entrepreneurs venture philanthropy may be a more pressing concern.
Investing and operating at the same time
Of the Multi Family Offices surveyed who service around 700 individual families in total, around 65% of their clients have a stake in their operational business. On average the share of wealth still in operational business is around 40%.
From an involvement perspective, most MFOs limit their advice on operational business and act more as strategic discussion partners. They are focused on ensuring that the families’ operational and financial assets are aligned, and the related risks managed. A select few take a very hands-on approach, where they take care of everything on the client’s behalf. Some would instead choose to take a board seat and represent the client’s interests in this manner.
Whilst many Multi Family Offices not get directly involved in the core business, there are still plenty of opportunities to explore with families that have a share in operational business, such as supporting family expansions of future exits. This is a non-invasive opportunity for MFOs to collaborate on more deals that involve the clients’ respective businesses.