THE LATEST FRONTIER OF FINANCIAL CONSULTANCY: THE MULTI-FAMILY OFFICE

Investire | April 2021

The scope of private banking and wealth management is ever expanding. Today the word multi-family office has entered the vocabulary of financial advisors. 

Driven by networks of financial advisors and private bankers, wealth management and private banking services have become accessible and scalable.

Once reserved for a selected few, club deals, illiquid investments, Lombard investments, tax and succession consultancy, corporate and investment banking, and private insurance services are today available to any client of nearly all financial networks. 

The field of financial consultancy is currently experiencing a new renaissance. It is an ever-changing field and today it is heading in the direction of services typical of family offices. What is a family office?

At present, there is no univocal definition of “Family Office”. There are several definitions which change according to the services provided and the vehicle employed. 

All family offices offer “integrated solutions” for managing the family total assets which include liquid and illiquid assets (e.g., company shares, properties, art collections etc.)

Multi-family offices involve more than one family. They have two peculiarities connected to the economies of scale deriving from its multi-family structure: 1) they charge lower fees than family offices (in the order of +20 basis points); 2) the average net worth of each family is lower than the average net worth of a single family assisted by a family office, while their holdings tend to be larger. 

At any rate, we are looking at families with a net worth of over 20 million euros; they are in all respects UHNWIs. 

At present, there are about 140 family offices in Italy employing about 600 people in charge of assets under advisory worth over 80 billion euros for little less than 30 thousand clients. 

Family office services are not particularly innovative: in Italy, before the rise of the family office, the same services were offered by accountants, lawyers and notaries.

As opposed to banks, often bypassed or used instrumentally, FOs and MFOs control a section of the asset management field with high profit margins, characterized by zero capital absorption and 100% consultancy. 

Fixed costs are fundamentally linked to financial professionals who often come from asset management and corporate & investment of banks. Structural costs are unimportant respect to those beared by banks, and their role is characterized by rapid action and flexibility. 

Some of the most attentive financial networks have not missed this new trend and some of them are betting on services offered by FOs and MFOs: and, if financial networks work as they did in the field of private banking, we shall be in for a wild ride. 

Nicola Ronchetti 

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