Common misconceptions about multifamily offices

Multifamily offices coordinate financial affairs for several families, but the label does not describe a uniform set of services, fees or legal duties. Common misconceptions can obscure the differences between providers and the work each family expects them to perform.

A larger multifamily office is always a better fit

Size alone does not establish whether an office can meet a family's needs. A larger organization may have a wider staff, while a smaller one may focus on a particular client group or service. Neither structure establishes the quality of the working relationship.

Family Office Club research emphasizes fit and customization when comparing offices. Those ideas become clearer when connected to actual responsibilities, such as coordinating tax advisers, preparing consolidated reports or supporting a generation transition.

A service list also needs context. An office might perform work internally, coordinate outside specialists or provide introductions. Those arrangements involve different responsibilities, even when the descriptions use similar language.

Every multifamily office has the same fiduciary duties

The term multifamily office does not, by itself, establish a fiduciary relationship. Family Office Club research notes that engagement terms can disclaim fiduciary duty. The relevant entity and agreement matter when describing what an office has undertaken to do.

Family Office Club research distinguishes suitability at the time of purchase from fiduciary duty involving ongoing oversight. This distinction is useful, but a label alone does not explain the scope of a particular engagement or its legal obligations.

Conflicts also need separate attention. Product sales and commissions can affect incentives. A description of an office's responsibilities is clearer when it explains:

• Which entity provides each service.
• What ongoing oversight the agreement includes.
• How compensation and product relationships are disclosed.

There is a standard fee that covers everything

Richard Wilson of Family Office Club says charges vary with the services provided. He notes that concierge and philanthropic work may carry extra charges. A quoted fee therefore needs an accompanying description of scope.

Family Office Club research describes several fee structures, including flat fees, charges based on assets under management and retainers. These describe how a charge is calculated. They do not establish which services are included.

Two offices can quote a similar rate while covering different work. One arrangement may include routine coordination, while another may charge separately for certain projects. Comparing fees without comparing responsibilities can leave a misleading impression of cost. The timing of charges and the treatment of outside specialist expenses also affect how a fee proposal reads.

A fixed wealth threshold determines when an office makes sense

Published asset thresholds are opinions about particular operating models. They are not universal entry requirements for multifamily offices. The cost of employing a dedicated team is a different question from the minimum a shared service provider sets for clients.

Family Office Club research reports Slough's estimate of about $100 million to $250 million for single-family office viability. It also reports Botticelli's estimate of about $500 million to $700 million for dedicated staff. Erulin says there is no fixed minimum.

These differing views reflect the importance of scope and staffing. They also show why a threshold needs attribution and context. Cost surveys have limits too. Erulin flags self-selected, unaudited samples, which can make a survey average an uncertain guide to another family's circumstances.

Direct deals are a core capability at every multifamily office

Richard Wilson says most multifamily offices offer limited support for direct deals. Access to investments should therefore be distinguished from the ability to source and monitor an investment directly.

A direct investment involves ownership in a business or asset without a pooled fund handling the investment process. The work can include financial analysis, legal coordination and ongoing monitoring. An office's broader investment services do not establish that it performs all of these tasks.

Family Office Club research also discusses manager screening and investment structures compatible with asset-based fees. These are different activities from operating a dedicated direct-deal team. Clear descriptions identify the work performed and who is responsible for it.

Very wealthy families have no use for shared services

A single-family office works for one family. A multifamily office works for several. These definitions describe whom an organization serves, not a rigid ladder that families move up as wealth grows.

Family Office Club research notes that even large family offices use multifamily offices and private banks for some functions. Internal staff and outside providers can work together, with responsibilities divided by service or expertise.

Richard Wilson also says that adding outside families to a single-family office would usually make it a multifamily office and may bring SEC rules into consideration. Expanding the client base can change the operating model and regulatory questions.

FAQs

Does every multifamily office provide tax and estate services?

No. Service scope varies, and an office may coordinate outside professionals instead of performing the work internally.

Does an asset-based fee include every expense?

No. Richard Wilson says some services may be billed separately. The agreement defines the included work.

Can a family use both internal staff and an MFO?

Yes. Family Office Club research describes large family offices using outside providers for selected functions.

Sources

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

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