MFO fee models compared: flat, tiered by AUM, retainer, performance-only

Multi-family offices, or MFOs, can charge a flat fee, a fee tied to assets under management, a retainer, or a fee based on investment performance. Comparing these models starts with the services covered, the calculation rules, and the costs billed separately.

Start with the scope of the engagement

A fee label describes how a charge is calculated. It does not explain the full service agreement. Investment management, financial reporting, tax coordination, estate planning coordination, and household administration can involve different responsibilities and separate providers.

Richard Wilson of Family Office Club says MFO charges vary by service, with concierge, philanthropic, legal, and fund work potentially billed extra. That makes scope central to any comparison. A quoted annual charge may cover investment oversight while leaving other work outside the agreement.

Family Office Club research do not establish a standard MFO price. A useful comparison places each proposal beside the same service list and identifies which tasks the office performs, coordinates, or excludes. Coordination does not necessarily include the outside professional's bill.

Flat fees: a stated price for defined work

A flat fee sets a stated charge for an agreed scope and period. The price may reflect expected workload, family complexity, or the services included. It does not automatically rise and fall with portfolio value, although the agreement may allow revisions.

This model can make the office's own charge easier to budget. Its usefulness depends on clear boundaries. New entities, additional family members, or a major transaction may trigger a revised scope or separate project fee.

Family Office Club research describe Element Pointe as using a flat fee informed by a scope review alongside a tiered schedule. This example shows that fee models can coexist within one arrangement. A proposal's headline label may leave out part of its pricing structure.

Tiered AUM fees: charges linked to asset value

An assets under management fee applies a percentage to a defined asset base. A tiered schedule uses different rates at different asset levels. The agreement needs to explain whether each rate applies only to assets within its band or whether reaching a threshold changes the rate on the entire balance.

Under a marginal tier structure, each portion of the portfolio is charged at its applicable rate. Under a whole-balance structure, a qualifying rate applies across the defined asset base. Similar-looking schedules can therefore produce different totals.

The asset definition also matters. Managed investments, assets held elsewhere, cash, and illiquid holdings may receive different treatment. Valuation dates affect the calculation. When fees depend on asset value, charges can increase as markets rise even if the service workload stays similar.

• Which assets enter the calculation?
• How are illiquid assets valued?
• When are values measured and fees collected?
• How do deposits and withdrawals affect billing?

Retainers: payment for an ongoing relationship

A retainer is a recurring payment for agreed services, access, or reserved capacity. It may be billed monthly, quarterly, or annually. Some retainers cover a defined package. Others pay for availability while particular tasks carry additional charges.

Retainer and flat-fee arrangements can overlap. A fixed annual fee paid quarterly may function as both. The distinction becomes clearer when the contract states what the payment buys and how unused capacity, extra work, and termination are handled.

A retainer can support continuing coordination across advisers and family matters. The recurring payment alone does not establish how much work is included. Service commitments, response expectations, and project boundaries give the price practical meaning.

Performance-only fees: payment tied to investment results

A performance-only arrangement bases the provider's compensation on investment results, without a separate base management charge for the covered mandate. It does not necessarily eliminate custody costs, underlying fund expenses, transaction charges, or fees for other family office services.

The definition of performance shapes the economics. A hurdle sets a return level that must be reached before a performance fee applies. A high-water mark generally prevents charging again on gains that merely recover previously recorded losses. Calculation details depend on the agreement.

The measurement period and treatment of unrealized gains also matter. Performance fees create an incentive linked to returns, but that incentive can affect risk-taking. The fee structure alone does not establish fiduciary status. Family Office Club research warn that engagement terms can disclaim fiduciary duty, making those terms a separate part of the comparison.

FAQs

Can an MFO combine several fee models?

Yes. An arrangement can combine a recurring service fee, an AUM charge, and separate project billing. Each component needs a defined scope so the total cost can be understood.

Does performance-only mean there is no cost after a loss?

A performance fee may not be payable, depending on the calculation terms. Other expenses can still apply, including underlying investment costs and charges for services outside the performance-based mandate.

How can different proposals be compared consistently?

Use the same service scope, asset values, and return assumptions for each calculation. Include separate expenses and identify which charges change with workload, asset values, or investment results.

Sources

• Family Office Club research database
• Family Office Club research database

Related: all guides, the directory, calculators. For events and peer access, see FamilyOffices.com.