Multi-Family Office

The Society of Family Office Board concurs with the definition of the Family Office offered by CCC Alliance. 

According to Stephen Martiros and Todd Millay of CCC Alliance, ‘scale wealth’ is defined as the amount of financial assets required to retain well qualified, full-time, in-house professionals (e.g., accountants, lawyers, investment advisors) regardless of the actual structure used. This is generally estimated to be from $50 million to $100 million in assets. Regardless of whether they have established a formal family office, any family with over $50 million in assets should understand the framework of a family office

Prince and Grove researched over 650 family offices and identified three different types of family office structures: the classic single family office, in which one wealthy family handles all of their affairs internally; the multi-family office (MFO), which caters to more than one family, from five or six to upwards of 50; and a commercial family office  (CFO), which is primarily a wealth management firm that has created a platform to provide family office services with considerably fewer overall assets.

Family offices follow three templates: administrative, hybrid, or comprehensive.

• In an Administrative Family Office, advisory and investment management services are managed through contracts with external service providers. The administrative family office typically directly employs staff to provide some level of bookkeeping, tax, or administrative services—often on a part-time basis. Families that utilize an administrative family office template typically have an asset base of $50 million to several hundred million dollars. Overhead costs for this model range from $300,000 to $500,000.
  
  
• The Hybrid Family Office keeps functions strategic to the family’s objectives in-house, and outsources nonstrategic functions. Some families hire family members for certain strategic activities, when the family member has a demonstrated expertise or when privacy and continuity of management are top concerns. In addition to administrative functions, hybrid family offices employ experts in tax, legal, and/or asset allocation. Certain investment management functions may be kept in-house particularly where it leverages a family’s industry expertise—e.g., real estate investing. Families that utilize a hybrid family office template typically have an asset base of $100 million to $1 billion. Overhead costs for this model range from $500,000 to $2,000,000 or more.
  
  
• The Comprehensive Family Office is designed to provide services for families who desire the maximum degree of control, security, and privacy. All functions, including administrative, tax, legal, risk management, and core investment management, are provided by in-house employees. Specialized investment management activities such as hedge fund, venture capital, private equity, or emerging market investments may be sourced externally depending on each family’s objectives, budget, and their ability to recruit and retain such talent. Families that utilize a comprehensive template typically have assets greater than $1 billion. Overhead costs for this model range from $1,000,000 to $10,000,000 or more when performance bonuses are included.

In Asia the starting numbers could be as low as $30 million. This makes the coming together of multi-families crucial in mitigating set up and running costs.

Running a multi-family office is never an easy task. Multi-family office executives or advisors need to gain in-depth understanding of clients investment preferences, product holdings and mindsets.

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