Single-family offices have flourished in the last 20 years. In fact, no part of the financial services sector, if SFOs fit into this category, has flourished as much. But what about multi-family offices? Have they flourished in the same time period?
With the definition of a MFO harder to pin down than a SFO, it’s difficult to give any authoritative estimate on their numbers. Despite many MFOs saying they have a minimum requirement of assets for high net worth individuals to place with them, normally a million dollars-plus, many MFOs accept lower thresholds. And some are clearly masquerading as private-client asset managers – in fact, many are little different than many firms that don’t call themselves MFOs. It’s probably true to say that the term has been overused in the last 10 and more years because of the perceived kudos of using the term family office in pitching for clients.
Trends in the sector have also been towards consolidation since the financial crisis of 2008. Higher regulatory costs, pressure from clients on fees, and fierce competition for the assets of the ultra-high net worth have led many to merge with competitors, or go out of business altogether. But there has also been growth, through SFOs converting themselves into MFOs, and the continued growth in the numbers of UHNW individuals and in the assets they have. This has increased demand for MFO services.
There are also many under the radar MFOs like the Silicon Valley investment group Iconiq Capital. Typically, such firms manage the money of a few clients and are very much non-commercial, i.e., they don’t accept clients unless they are invited.
In recent years, MFOs numbers have also grown in emerging markets, particularly in the Middle East and Asia. The wealthiest individuals and families in these regions might be reluctant to set up a SFO, but will place some assets with a MFO. MFOs continue to flourish in the big economies, particularly in the US and Germany, where there are many smaller, regional MFOs with low profiles.
Taking all this into account, the numbers of MFOs in the world is nevertheless much less than the number of SFOs. Family Capital reckons there’s around 1,500 bonafide MFOs (those that really are targeting the UHNW, have million dollar-plus thresholds to be a client, and aren’t one-man bands), compared with around 5,000-plus bonafide SFOs.
That still offers the UHNW many options to where to place their money even without taking into account the many private bank options. Given this, the sector continues to flourish, albeit not as much as their more rarefied counterparts, SFOs.