The MFO
Multifamily offices offer an alternative for families who want to outsource coordination or don’t have the level of wealth to sustain a single-family office.
The multifamily office offers a variety of financial services to multiple client families. Its structure can vary, but the shared experiences of the families involved allow for better planning opportunities and on-hand solutions to common ultra-high-net-worth complexities. Knowing that every client situation is unique, a well-run multifamily office can anticipate challenges easily, because its advisors have garnered experience by working with similar issues common to families of wealth and they enjoy resources readily available to address these issues.
Some families take advantage of the full-service multifamily office offering, using everything the business offers, while other families might use only some of the services. Families can also go a hybrid route—hire multifamily offices as complements to their single-family offices for added holistic management if certain areas feel overwhelming or certain problems start falling through the cracks. If that’s the case, I recommend that the family retain the single-family office functions that play to their expertise and passion and use the multifamily office relationship to ensure that everything runs cohesively with their overall goals.
For example, I’ve observed some families wanting to have a greater impact on the world with their philanthropic giving—part of the family’s values that must align with the mission of the single-family office. But that job might be hard for an SFO if there’s no dedicated family education. With a service like philanthropic planning, I can help a family come together around a common interest. With impact investing, I can take families through exercises to identify companies, organizations or funds that generate social or environmental impact as well as seek a financial return. But working within a multifamily office, I can offer my clients the full impact of an in-house investment and philanthropy department to provide an informed and comprehensive experience.
There is a distinct difference between a true multifamily office and a firm that provides multifamily office services. I recommend examining the way an organization structures its service teams and delivers its services. What is the range of services offered? How does the firm charge for these services—with flat fees, hourly fees or asset-based fees? These are important questions to ask when considering hiring a multifamily office. In addition, you should ask for a firm’s family-to-advisor ratio as a measure of its capacity to take on another family as clients.
An effective multifamily office is in the business of serving its client families with a holistic view into all their financial affairs. There is a perception that these offices are expensive, but they’re often comparable to what a single-family office is already paying its employees and professional advisors. In fact, with a multifamily office, you’re likely to get more for your money. Additionally, the proper planning and strategic oversight that multifamily offices bring can have a big impact on the bottom line.
The talents and skills needed to build wealth often differ from those required to sustain and protect it. Managing personal and complicated finances for ultra-high-net-worth families is as much about the relationships as it is about the money. The goal is for families to enjoy their wealth and not feel burdened by it. Regardless of what type of financial structure fits well, it’s important that the people overseeing it be the best possible stewards of those resources.
Dotti Reeder is managing director of the client advisory team at Tolleson Wealth Management.