By Pete Bucci
Feb 28, 2007
A growing number of multi-family offices (MFOs) are jostling to help wealthy families manage their investments. Such families have the option of going with an independent firm or one that’s part of a large institution, Financial Times reports.

Ed Lazar, president of The Threshold Group, an MFO that serves families worth more than $200 million, says MFOs within big institutions offer global reach, a wide product lineup and extensive staff. On the other hand, a boutique offers more intimate and personalized service, he says.

Jane and George Russell established The Threshold Group in 1998. Their grandfather founded the Frank Russell Company, which is now called the Russell Investment Group. Besides investment advice, the firm offers guidance on philanthropy and transferring wealth to heirs, as well as “special projects”, such as helping clients manage properties.

About 10 years ago, there were only about a dozen MFOs in the U.S. Currently, it is estimated that there are 58 to 130 operating. John Benevides, president of the Family Office Exchange, sees it as the dawn of a new industry, the new step in the maturing wealth management industry.

Thomas Livergood, founder and CEO of the consulting firm Family Wealth Alliance, says MFOs are filling a niche by serving families with $20 million to $200 million, which are too wealthy for traditional firms but are too small to have single-family offices (SFOs). He says the upper limit is rising.

Benevides says wealthy families are being confronted with increasingly complex financial, accounting, legal and tax needs, plus what the industry calls “family governance.” That is driving the rise of the MFO model, which is a blend of investment advisory and wealth advisory businesses.

Benevides cites three types of MFOs: institutionally backed firms, like SunTrust unit Asset Management Advisors; MFOs that began as SFOs, like the Pitcairn Financial Group and Rockefeller & Company; and independent firms, including Vogel Consulting and Quintile Wealth Management.

Livergood says the biggest obstacle to industry growth is a persistent shortage of client relationship managers. He says that raises questions about the sustainability of boutique firms and the continuity of their service.

Robert Casey, senior managing director for research at the Family Wealth Alliance, says families are concerned whether firms will be able to manage multi-generational wealth. But he also notes that large institutions have struggled with turnover and continuity in recent years.

Casey says the focus has shifted in wealth management from products to clients, and the industry needs to find advisors that are more client-oriented.