MFO SERVICE OFFERINGS

1. Comprehensive financial planning

2. Portfolio management

3. Back office/consolidated reporting

4. Estate and wealth transfer

5. Tax planning, preparation and compliance

6. Risk management

7. Trustee services

8. Life management

9. Family consulting, governance, meetings and education

10. Strategic philanthropy and administration

For example, accounting-based independent MFOs are often strong in tax and compliance work, and tend to work with first-generation wealth creators (e.g., the business owner who sells out). However, because these MFO firms are independent, they may not have business continuity plans in place. On the other hand, large financial institutions can be counted upon not to go away entirely, but they are often subject to mergers and other restructurings. These institutions generally have higher employee turnover, and they may push their own products, which in turn can affect the objectivity of their advice. And just because an MFO comes from a single-family office, for instance, there is no guarantee of success in delivering services on a consistent basis to the private families it invites in. Families must ask the right questions to ascertain whether these issues affect the MFOs they consider hiring.

What professional credentials, competencies and experience does the MFO firm need to possess in order to implement and manage the 10 core services that are essential to the private families they serve? Each firm will have a personality, in that along with its point of origin, it will emphasize and specialize in certain core services offered and the types of families served (such as first-generation wealth creators versus multigenerational families). According to the Alliance’s Multifamily Office Standards, best-in-class MFOs will have a multidisciplinary staff (e.g., CPA, CFP, CFA, JD or other professional credentials) that demonstrates professional competency and the experience to serve complex client families. They will have at least three years’ experience in providing services to a minimum of 10 unrelated families with a minimum median net worth of $20 million. They should also demonstrate their professional involvement and commitment by assisting in setting standards and self-regulation; participation in family office conferences, seminars and meetings; and membership in leading organizations. Finally, these firms should be stable in terms of their ownership, management and business continuity to ensure their long-term viability and ability to serve succeeding generations of their client families.

The Alliance estimates that there are now more than 100 MFOs in North America, but it recognizes few more than 20 that are truly best-in-class. The typical best-in-class firm is independently owned and operated with a staff of 30 professionals. It serves about 40 families with a median net worth of approximately $50 million, for a total net worth under advisement of about $2 billion, roughly four times the size of the average single-family office. While growing as a whole, these MFOs struggle with managing their growth and with finding the key to consistent, replicable delivery of services to their clients. They also have a difficult time finding and retaining key talent to serve their growing list of families. And, because they are largely independent, they have issues surrounding the business continuity of their firms.

How the firms manage these issues sets the leaders apart. The best-in-class MFO firms are well managed and are most concerned about giving their clients objective advice. They are not as concerned about growing their client list. Indeed, they consider the best-fit nature of a long-term relationship with any new family referred to them. As a result, the best-in-class MFO firms back away from as many potential client families as they accept. Because of this, these firms appear "shy" and unsophisticated in their marketing efforts. When matched with the privacy concerns and inaccessibility of wealthy families, one begins to understand why it is so difficult to find a best-in-class MFO suited to that prototypical middle-market woman and her complex needs.