Could a multifamily office favor affiliated investment products or preferred providers?
Short answer
Yes. A multifamily office may recommend products or providers connected to its owners, affiliates, or business partners. That relationship can create a conflict. The office should explain the relationship, compensation, fees, available alternatives, and selection process. Families should review Form ADV and ask whether independent options were considered.
Why this can happen</h2><body>A multifamily office may have an affiliated investment adviser, broker, bank, fund manager, custodian, lender, or insurance agency. It may also receive revenue, service benefits, or other compensation from a provider. These relationships can influence which products receive attention. The SEC says advisers must identify and address conflicts, including situations where advice is limited to products offered through an affiliated firm. SEC Staff Bulletin</body>
What disclosure should cover</h2><body>Disclosure should be specific enough for a client to understand the conflict and make an informed decision. Look for ownership links, referral arrangements, revenue sharing, fees, commissions, expense reimbursements, and whether the office or related persons have a financial interest in a recommended product. SEC Form ADV requires advisers to describe conflicts and compensation practices. Its relationship summary identifies services, fees, conflicts, and disciplinary history for covered advisers. SEC Commission Interpretation Investor.gov Form ADV</body>
Develop your 100-point due diligence checklist so that you can refer to it, not that you're going to go through all 100 points with every deal, but you can ask yourself, what else should we be asking about this deal? What are we afraid of?
Questions families can ask</h2><body>Ask whether the office can use unaffiliated products and providers. Ask how it compares fees, liquidity, risk, performance history, service levels, and operational controls. Ask whether the office receives direct or indirect compensation. Ask for the written investment policy, conflicts policy, and Form ADV Part 2 brochure. The SEC's brochure instructions call for disclosure when clients can purchase recommended products through unaffiliated brokers or agents. SEC Form ADV Part 2 A preference is easier to evaluate when the office records the alternatives considered and explains why the selected option fits the family's stated objectives. This page is educational and does not provide legal, tax, or investment advice.</body>
Related guides
- Family Office Due Diligence: A Practical Guide for Multifamily Offices
- Access to Alternatives Through an MFO: A Practical Guide for Families
- Cross-Border Families and Multifamily Offices: A Practical Guide