The family office represents a
center of influence and stability to help families with exceptional
wealth ensure the preservation and growth of their financial assets and
family heritage. In general, an MFO aggregates and focuses resources to
facilitate a common interest in asset protection, cost control,
financial education, family philanthropy and a host of other needs.
CHARACTERISTICS 2
MFOs tend to have the following characteristics:
Independence:
MFOs typically do not sell (traditional products that a family might
typically encounter from a brokerage firm) and generally are not
compensated for the products utilized by clients. MFOs usually follow a
"service delivery model” holding themselves out as an objective provider
of advice that places the interests of their clients first.
Breadth and Integration of Services:
MFOs provide a wide array of services and typically oversee their
clients’ entire financial universe. MFOs will have full information
about their clients investments, tax situation, estate plan and family
dynamics. With this information the MFO can assist in structuring and
administering the clients’ financial universe in an optimal fashion.
Professionals with Diverse Skills and Deep Specialties:
MFO professionals provide a wide array of advice and assistance to
their clients. MFOs also have to be able to provide specialty knowledge
on certain topics such as: income taxation, estate planning, and
investments.
High Touch Services:
MFOs have high average account sizes and low client to employee ratios.
Large account sizes combined with low client-to-employee ratios allows a
great deal of focus and attention on each client family. Meetings with
clients often occur many times a year.
Multi-Generational Planning:
MFOs typically work with an entire family – the patriarch/matriarch,
their children and grandchildren. Planning encompasses the family’s
goals which typically includes passing wealth down to lower generations
in a tax efficient manner. Children and grandchildren are clients and
are counseled on investments, taxes, estate planning, and philanthropy
from an early age. MFOs often coordinate and moderate family meetings
for their client families.
Outsourcing:
MFOs do not typically provide all services in-house. It is common for
some of the investment management to be outsourced to independent money
managers. Custody and tax return preparation are also commonly
outsourced.
Focus on Taxable Investor:
Most MFOs have a myopic focus on taxable investors as the bulk of their
client's assets are subject to short and long term capital gains. This
is unique to very high net worth families. Most investment research
(academic and financial service industry) is geared toward the
institutional investor and foundations (with very different tax concerns
than individuals and families). The bulk of the research done for the
individual investor relates to 401ks and IRAs.
BENEFITS2
MFOs may have one or more of the following benefits:
- Objective financial advice
- Creative solutions to financial issues
- Clearinghouse for financial, investment, tax and estate planning ideas
- Advice from professional team with diverse backgrounds
- Coordination of other advisers
- Proactive advice – a function of low client to employee ratio and frequency of meetings
- Delivery of carefully selected money managers, custody, insurance, loans, etc.
- Negotiated cost savings with other financial providers (e.g. investment management, custody, trading costs)
- Integration of client’s estate planning, income taxes, investments, philanthropic goals and family situation
1
Family Office Exchange, 2009. What is a Multi-Family Office (MFO)?
http://www.foxexchange.com/private/members/mfo/mfo.asp
2
Wikipedia, 2009. Multi-family office.
http://en.wikipedia.org/wiki/Multi-family_office