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MULTIFAMILY OFFICES


Seamless support “Less than one third of multifamily offices currently provide merchant or investment banking services or traditional banking services to clients.” said Flynn. “HNW families are increasingly looking to their family offices to manage the entire business relationship, including capitalization of family-owned businesses and enterprises. The joint venture structure allows multifamily offices to meet demand while generating an additional source of fee income on transactions and credit facilities.” “Most – though surprisingly not all – multifamily


Flynn, a principal in the Rothstein Kass Family Office Group. “Their reputation as trusted advisers and comprehensive service offerings support strong asset flows in times of uncertainty, as clients look beyond performance for a safe haven in the storm. “Without exception, multifamily offices provide asset


management services to their clients, but beyond that, the models are as diverse as their clients’ objectives. Many firms feature an anchor client that can represent more than 30 per cent of assets under management. Since these families are often the initial firm clients, their needs tend to influence the original complement of services offered,” said Flynn. “In establishing a multifamily office structure, organizers should seek to create a service model that can be replicated but can also be customized to reflect divergent needs.


offices offer seamless administrative support to clients, in the form of bill paying, tax and other ancillary services. In part because these are lower margin services, a significant minority of firms elect to outsource these elements to a third-party provider. However, roughly two thirds of respondents indicated that they retain control over these functions on behalf of their clients,” said Flynn. “The reluctance to cede responsibility for these labor-intensive tasks illustrates the perceived value. Firms are very aware that fumbling of administrative functions by a third- party provider can undermine client satisfaction even when other aspects are undeniably successful. With so much at stake, many firms are willing to view administrative services as a loss leader to maintain the integrity of their client relationships. “Lifestyle services are heavily outsourced by


Key findings


Despite a reputation for offering a full suite of services, the majority of multifamily offices still generate more than 80 per cent of revenues from asset-based fees on investment-related services.


Non-core services such as insurance, banking and lifestyle support are generally outsourced to allow for flexibility and cost management. Both the description and the business model have been interpreted and implemented across the financial industry in myriad ways, resulting in very little standardization among providers.


Precise execution can deliver long-term, profitable client relationships and a durable business model for early adopters.


multifamily offices, despite the fact that these offerings are a potential source of direct fees. Nearly all firms offering concierge, family security and healthcare services elect to outsource to a third party. This is reflective of both the lower profitability model and the financial services orientation of advisory firms. In most cases, these services can be provided more efficiently by designated professionals who are far better equipped to understand the nuances of the diverse options available,” said Flynn. “The decision to outsource services such as formal family education and philanthropic training require more deliberation. Charitable involvement and educational initiatives are often multi-generational endeavors that can help to establish a family’s legacy by formalizing and articulating overarching philosophies. These conversations help to shape overarching strategy. In many cases, the asset management component funds the philanthropic activities that are most gratifying to HNW clients.”


From Rothstein Kass Family Office Group’s The Multifamily Office Solution, by Hannah Shaw Grove and Russ Alan Prince. Rothstein Kass conducted a telephone-based survey in 2009 of 103 investment advisory firms that identify themselves as multifamily offices. The sample was roughly split between US and non-US domiciles with average assets under management near US$1 billion and median assets of slightly more than US$600 million.


FAMILY OFFICE: ASIA TOMORROW 43


THE FAMILY OFFICE


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