“If you’ve met one family office, you’ve met one family office.”
This phrase is often heard at conferences, in meetings and in the literature, but is it true?
To a certain extent it probably should be true: after all, a key driver for setting up a single family office (SFO) is a search for bespoke solutions that exactly fit the needs of a single wealthy family.
A multi family office (MFO) must also differentiate itself from its competitors in order to attract new clients. This could be through its staff, its fee structure, its investment approach, its location, the level and number of services provided or, even, the other client families.
But isn’t the mere existence of MFOs proof that the statement is false? Members of an MFO are, after all, families that are often receiving very similar levels of support and service from their service provider – the MFO.
So, are all family offices unique? Yes and no.
It is certainly true that the sheer number of possible configurations of a family office (virtual, multi, single; investment only, through to full service etc.) mean it is possible, and one could even argue it is likely; and although families that join an MFO are signing up for similar services, they have selected a particular MFO for their own specific “unique” reasons.
It is also true, though, that family offices often share characteristics and goals. This often results in diverse family offices employing similar approaches or strategies. Considerable insight can be gained from segmenting the family office landscape into approaches or strategies that can be compared and those that cannot.
Traditionally, data providers have made two cuts in the data – SFO v MFO and sub-$1billion vs $1billion+.
Are these cuts appropriate, or useful? Probably not.
For example, those that call themselves MFOs range from private offices serving a handful of families (usually with a “cornerstone” family/families) with no desire to market their services to others, right through to the largest global wealth managers, desperately shining up their “MFO badge” for marketing purposes. How can one possibly discover useful insights within a data segment that is so diverse?
And just because a family office runs more than $1billion it doesn’t mean they will share the same investment outlook or governance structures. Compare the needs of a recently retired hedge fund manager in the USA to that of a multi-generational European family that made its money hundreds of years ago.
Other providers simply lump family offices (and wealth managers) together, leading to an even greater level of confusion in their analyses.
Why should family offices care about this?
If you are a family office it is virtually impossible to compare yourself with your true peers; and if you cannot compare yourself to your peers, how can you really know how well you are doing? How can you be sure you have the best possible governance structure? How can you know you are offering the right incentives for your staff?