Key differences between single family offices and multi-family offices in 2018
What follows is a guide composed by Paul Avon and team as a primer on some of the core differences between single family offices and multi-family offices.
What is a single family office?
A single family office (SFO) is a private company or similar entity which exists to fulfil a broad range of tasks on behalf of a single family. They are generally established only by families with a net worth in excess of US$150m and with sufficiently complex affairs to justify the expense – customarily in the order of 80 to 100 basis points of total assets under management (AUM).
In an SFO, the staff are permanent employees of the legal entity and report directly to the Head of the Family Office (or Managing Director/CEO/equivalent) and/or the Principal. Recruitment takes place on the basis of a family’s particular requirements, but almost all SFO’s will manage the family’s financial (including investment activities) and legal affairs. Whilst their primary focus is on these professional services, some SFO’s will also include staff who are devoted to managing a broad range of other areas – including (but not limited to) concierge type activities, general household staff, real estate, yachts and aircraft.
What is a multi-family office?
A multi-family office (MFO) is a platform that provides professional services to a group of families or individuals, who share the same team of staff. Staff are employed by the MFO and will often work across the accounts of multiple clients who are then billed for their time. More akin to a practice environment than an SFO, employees may work on a retainer, project or on a pro rata basis, usually billed on an hourly, day or fixed fee basis.
For clients, MFO’s provide access to a wide range of experienced professionals and proven processes. Significantly, they are also much more affordable than SFO’s. However, it can be the case in some smaller MFO’s that one particularly ‘dominant’ family absorbs the majority of the staff’s time, potentially to the exclusion of the other clients.
Because they aim for broader appeal rather than tailoring to a specific family’s requirements, MFO’s tend to offer a smaller range of services than SFO’s and are primarily focused on core professional skills such as financial and investment management, legal advice and trust & company services. Many MFO’s are run as businesses, seeking new mandates/AUM and expanding existing accounts in addition to meeting current client needs.
Key differences between working in a SFO and a MFO
A key difference between SFO’s and MFO’s lies in the relative dynamism of an MFO, as opposed to the increased stability of an SFO.
SFO’s are generally more likely to retain team members over a longer period and keep a fairly constant number of staff, provided the family’s requirements do not drastically change. SFO employees may also find that they are dealing with more members of a particular family than they would in an MFO – with family other than the Principal having a degree of involvement and control.
Some find the focus and ‘purity’ of an SFO role to be more fulfilling – by concentrating on becoming expert in a single family’s affairs, it can be possible to achieve greater long-term progress towards the client’s goals.
As MFO’s are often larger, with a greater number of staff and an evolving client base, they can be a better choice for a candidate for whom future career advancement is a concern. Recruitment into an MFO role is often well suited to those who are seeking a position with greater variety, as they will be working across a range of clients with differing requirements.
An MFO may also offer a more structured working environment. There is a clear hierarchy and employee roles are often clearly defined with detailed job descriptions. As an SFO invariably means direct contact with the Principal, employees must be able to adapt quickly to changing objectives and requirements.
Recruitment for family offices – key differences between hiring processes for SFO’s and MFO’s
Recruitment for SFO’s and MFO’s tends to occur via two primary channels – either via the personal contacts of management (e.g. Principal, Managing Director, Chief Executive, Chief of Staff, Head of Family Office or equivalent) or with the help of specialist family office executive search consultants.
This is due in part to the unique nature of each family office, which tends to require either a pre-existing working knowledge of a candidate or the advice of a recruiter who has pre-vetted and assessed their suitability for both the role and office for which they are applying.
Most SFO’s and MFO’s primarily use specialist family office recruiters, but for slightly different reasons. SFO’s tend to be small entities and hiring the right person both in terms of technical competence and personality fit are crucial. Whilst they may have the option of using personal contacts, getting this wrong can have disastrous consequences – a skilled recruiter who understands the idiosyncrasies of the family office environment could help avoid this.
For MFO’s, the primary reason is greater recruiting requirements in addition to the time efficiencies professional recruiters make possible. They are frequently employed by both MFO’s and SFO’s for their ability to help to lessen the time the existing staff might need to spend finding and assessing candidates.
Other types of family office: Hybrid and private offices
While SFO’s and MFO’s are the most common family office types, there are also other options. One is a ‘hybrid’ family office, in which the Principal or family has a solitary ‘right-hand’ adviser employed on a permanent basis. This individual will manage the family’s affairs and liaise on their behalf with suppliers of the services they require, primarily in relation to financial and legal matters.
Another is a private family office, where staff deal with only with the Principal – other family members are not granted any influence or control over the office’s work. This type of family office is often employed by a Principal for whom the office exists to provide business and particularly investment management, rather than supervision of personal affairs.
Is a role in a single family office or multi-family office right for you?
Deciding whether to work in an SFO or MFO depends primarily on what stage the individual is at in their career and what they are aiming to achieve – while MFO’s are more likely to provide progression and development, working for a SFO offers more continuity and security. It may also provide greater job satisfaction.
But there’s truth in the family office adage: “If you’ve seen one family office, you’ve seen one family office”. Every Principal (or Principals) is different with unique assets, aims and characteristics. None are completely alike. If you are considering putting yourself forward for a role at a family office, do ensure its emphases and quirks align with your skillset and career goals.