3 Reasons RIAs Should Offer Multi-Family Office Services

The landscape of the wealth management industry is dynamic and continually evolving. In order to stay competitive, RIAs must consistently seek new avenues for growth and consider how to enhance their client service offering.

With the number of ultra-high net worth families — with a net worth greater than $30 million — continuing to rise, RIAs hoping to capture a piece of the more than $11.3 trillion of wealth held by UHNW families must assess what types of service offerings will be most attractive to families with multi-generational wealth.

A strategic move starting to gain a lot of traction in the wealth management space is determining whether to make the transition to become a multi-family office or incorporate MFO services into the existing offering.

As firms seek to gain a competitive edge and increase their ability to attract and retain UHNW clients, MFO services become a major consideration. However, the decision to become an MFO, or offer an abbreviated menu of one, should not be taken lightly.

Firms looking to transition should pay close attention to the myriad potential benefits and other critical factors before taking the leap.

Understanding MFOs

Family offices have long been a popular choice among UHNW families as they consolidate many of the financial, and non-financial, services often needed by families that have the complexities of multi-generational wealth.

They’ve gained significant popularity as they are a vehicle that’s seemingly able to offer the best of both worlds for families who have substantial wealth but are not yet ready, or perhaps large or complex enough, to warrant creating one of their own.

Services offered by MFOs vary greatly from one firm to the next and can cover a long array of categories including:

• Investment strategy & asset management
• Risk management
• Tax planning and compliance
• Estate planning
• Liquidity/cash flow management
• Liability/debt management
• Philanthropy
• Family governance and dynamics
• Lifestyle management
• Record keeping and reporting

The Benefits of Becoming an MFO

Although the list of services may be exhaustive and require a lot of coordination, the list of benefits for an RIA providing a selection of these services or setting up a multi-family office structure to provide all of them in-house can be compelling:

1. Cost Efficiency for the Firm and Clients

While the initial costs of setting up a family office can be substantial, the benefits of making that initial investment can include future economies of scale and cost efficiency in serving a particular niche of clients — one that potentially provides an increased and diversified revenue stream.

Wealthier families with more complex balance sheets require additional services that may allow firms to charge both an assets under management fee as well as fees for additional services like tax preparation or bill pay. Investing a larger pool of assets can provide better pricing breaks and increase negotiating power.

UHNW families may enjoy the cost effectiveness of centralized administration and oversight of assets as well as and avoid a duplication of efforts amongst multiple advisors that aren’t working collaboratively.

2. Privacy & Customization

The addition of family office services which attracts larger clients may also allow an RIA to boast additional privacy and exclusivity. High complexity clients demand more attention from their advisory firm, which can lead to a lower client-to-advisor ratio, and consequently enable better customization for the families.

3. A Better Value proposition

Firms that create a service model (like a MFO) that meets the needs of specific target clients have a more compelling value proposition – their entire firm, including the services offered, talent on board, processes and technology exists solely to service the UHNW family.

Thus, when deciding whether to become an MFO (or offer the services of one), a firm must first decide what their target client looks like and what services their target clients will perceive as valuable.

More Considerations

In order to effectively provide an interdisciplinary approach to wealth management that covers some or all of the above, RIAs hoping to increase their wallet share in the UHNW space need to assemble a team of experienced specialists working cohesively for their clients’ benefit.

Done properly, this would enable the firm to excel in customizing their service offering to each unique client — addressing the intricate needs of each family. However, a substantial upfront investment in everything from talent to technology must be made in order to successfully transition from an RIA to a full MFO.

Firms must also thoughtfully consider any compliance issues as well as the infrastructure required to be effective as an MFO.

That being said, there is definitely a compelling argument for RIAs to at least conduct a comprehensive cost-benefit analysis of adopting a full MFO model or adding on some MFO services — either of which (if done correctly) could result in significant upside for the firm.

With careful planning and strategic implementation, the transition from RIA to MFO can position a firm for sustainable growth and greater success in the ever-evolving wealth management landscape.

Kris Yamano is a partner at Crewe Advisors, a private wealth management firm she joined in 2021; she has about 20 years of experience in providing customized wealth planning services to high-net-worth individuals and families, including senior executives and business owners. 

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