Multi-family offices consolidate, single-family offices multiply

Working out the exact number of single-family offices has always been an inexact science, largely because of the secrecy around many of them. But few doubt their numbers have increased, and that there are fewer multi-family offices about. 

Dr Marc Herzog, the head of Frankfurt-based Family Office Consulting, says the number of SFOs in Germany is growing by around “30 to 40” a year. He reckons there are at least 1,150 SFOs in Germany. But he adds: “The number of MFOs is actually slightly declining.”

That trend appears to be duplicated in most of the big family office centres. MFO consolidation looks to be most apparent in London. The recent announcement of the merger of Fleming Family & Partners and Stonehage – both MFOs – comes seven months after the merger of Lord North Street and SandAire – again both MFOs.

Giuseppe Ciucci, the CEO of the newly merged Stonehage and FF&P said consolidation in his sector will accelerate. “Going forward you will see consolidation really happen.”

Ciucci says this is because the costs involved in running a 21st century MFO are rising all the time as a result of regulatory factors and technology requirements. “MFOs will also need to be more global as their clients increasingly require global reach in many aspects of their lives,” he said. 

Nevertheless, costs concerns around regulation and technology appear to worry SFOs less. A head of a London-based SFO, who wanted to remain anonymous, said: “SFOs don’t have the same onerous regulatory requirements as MFOs so compliance costs aren’t such a problem for most of us.”

He added that when an SFO is attached to an operational business, as his office is, costs could often be spread across the two, particularly when it comes to things like technology. “Regulatory and technology costs aren’t something that concerns us,” he said.

Increasingly, the trend is for families to set up small family offices to keep control over some aspects of their activities – the concierge-like ones, for instance, or direct investing in sectors that they are experts in – and to outsource activities like investing liquid assets or performing due diligence on potential deals to MFOs, who can gain efficiencies of scale in these things. 

If this trend continues then the future will see the sector evolve to have more, smaller SFOs, and a few larger MFOs.