Fleming merger raises an apples and oranges conundrum

Fleming Family & Partners, a wealth manager owned by an old English family whose most famous member was the James Bond creator Ian Fleming, is to merge with multi family office Stonehage, which was set up originally to manage the affairs of wealth South African families who left their country during the apartheid era.

The new firm will be huge, employing 500 staff, managing money for 250 families, with $43bn under management. The new firm will be called Stonehage Fleming Family & Partners. Its CEO will be Giuseppe Ciucci, current Chief Executive of Stonehage, while it will be based in the Flemings’ elegant central London offices. It will call itself a multi-family office.

Which raises a question: when is a family office no longer a family office? And what does a family office do that a conventional wealth manager doesn’t? In its press release the firm says: “Our role, simply put, is to protect and preserve the wealth” of their clients. But doesn’t a family office do a bit more than that? Single family offices, for instance, are often involved in direct investment using the knowledge of the founding family. In other words, they are engaged in entrepreneurial activity, not just wealth preservation. Family offices are also involved in tax affairs, dispute resolution, funding new businesses, drawing up trusts, running the philanthropic side, advising on art purchases and much more.

“Single family offices are complicated things. At one end they are functional, serving day-to-day family needs, and at the other end there is the full deployment of the family’s capital into the family businesses, foundations, investment portfolios and so on, which creates much more complexity than managing wealth,” says Paul Kearney, a managing director at Kleinwort Benson who advises family offices. “Managing the liquid assets of a family is only a small part of managing a family’s wealth, which is a much bigger issue and has a life cycle that can span generations.”

Is comparing a multi family office with a single one like comparing apples and oranges? To be fair to Stonehage, as Kearney points out, it started life helping its clients relocate to numerous international jurisdictions, dealing with tax, legal and inheritance issues and so has a wider range of expertise than asset management. But the term “family office” is getting bandied about more often these days by boutique investment firms who adopt the name.

That said, there are probably reasons that a multi family office the size of the new Fleming-Stonehage tie-up is a good idea. One is that it will probably be more likely to find good investments. Secondly, it can make savings and share knowledge. This lay behind the creation of the Wigmore Association, a grouping of eight MFOs from around the world formed in 2011 to share research and ideas.

Third is that the investment professionals can compare notes. One family office expert recently told Family Capital that their secrecy is such that the biggest worry for people working in family offices is: “Am I doing it right?” Joining with others gives them more people compare notes with. That’s good for clients.