Episode 4 of 10

How Multifamily Offices Charge

Multifamily offices use several fee models. Your job is to connect every dollar to a service, a responsibility, and a result you can review.

Family Office Service Providers & Partners - What to Know

Start with the fee map

A multifamily office, or MFO, serves several families through a shared platform. That shared model can spread technology, staff, reporting, and specialist costs across clients. Your proposal should show which costs are shared, which are assigned to your family, and which are paid to outside providers.

Ask for a one-page fee map before you compare firms. It should list the advisory fee, planning or family-office retainer, investment expenses, custody charges, transaction costs, private-market expenses, and any fees paid to affiliated companies. If a fee does not appear on the map, ask where it is disclosed.

Registered investment advisers generally describe their services, fees, conflicts, and disciplinary information in Form ADV Part 2, often called the brochure. You can review that filing through the SEC's Investment Adviser Public Disclosure website. SEC, Form ADV

The main fee models

Most MFO proposals combine one or more of these models.

An asset-based fee is a percentage of assets under management. The percentage may apply to all managed assets or only to a defined account. The proposal should state whether the fee is billed in advance or arrears, how often it is billed, and how deposits, withdrawals, and illiquid holdings are valued.

A fixed retainer charges a set amount for a defined package of services. This can make budgeting easier when the work includes governance, reporting, education, administration, or coordination that does not change with portfolio value. The agreement should state the expected meeting schedule, deliverables, response standards, and renewal terms.

An hourly or project fee charges for specific work, such as a family meeting, a policy review, a private investment review, or a transition project. Confirm who performs the work and whose time is billable.

Some firms combine a lower asset fee with a retainer. Others use a tiered schedule, where the percentage falls as assets rise. Ask the firm to show the annual dollar cost at three asset levels. That simple exercise exposes breakpoints and makes proposals easier to compare.

Investor.gov explains that advisory fees may be charged as a percentage of assets, hourly, or through other arrangements, and that investors should understand how the fee is calculated. Investor.gov, Investment Adviser Fees Ask who pays the office, whether product or referral revenue is involved, and how those incentives are disclosed.

Look beyond the headline percentage

The headline advisory fee is only one line in the total cost. Mutual funds and exchange-traded funds have operating expenses. Private funds may charge management fees, performance fees, and fund-level expenses. Custodians may charge account or wire fees. Trading can create commissions, spreads, or other transaction costs.

Ask whether the MFO receives revenue from affiliated managers, cash programs, insurance arrangements, banking relationships, or referral agreements. Ask whether the firm can select products that pay it more. A conflict is manageable when it is disclosed, monitored, and addressed in your agreement.

Wrap-fee programs can bundle advisory and transaction services, but the bundle does not automatically mean the lowest total cost. FINRA advises investors to compare the wrap fee with the services used and with the costs of paying separately. FINRA, Wrap Fee Programs

For private investments, request a total-cost schedule. Include subscription fees, management fees, carried interest, administration, legal expenses, audit costs, and any incentive allocation. You may not know the final amount at the start, but you should know the categories, calculation method, and reporting timing.

Match price to work

A lower fee can be expensive if the MFO does not perform the work your family needs. A higher fee can be reasonable when it replaces several outside relationships and produces better coordination. The comparison should focus on scope.

Write down the services you expect from episode 3 of this series. Mark each service as included, available for an extra fee, or excluded. Then ask for an example of the report, meeting agenda, investment review, or family education session you would receive.

Use the site's firms directory, location guides, 30 learning guides, calculators, and family-office questions to build your comparison file. The glossary can help define unfamiliar fee terms. If you are considering a new structure, review start a family office. Firms can submit details through claim your listing.

Set a review date

Fees should be reviewed when your assets, family structure, service needs, or investment mix changes. Put an annual fee review on the family calendar. Request a statement that shows what you paid, what services were delivered, and what third-party costs were charged.

A clear review process also helps when you add a new family branch, sell a business, receive an inheritance, or move assets between custodians. Those events can change the work required and the way fees are calculated.

Checklist

• Get a written fee map covering advisory, retainer, fund, custody, transaction, private-market, and affiliate-related costs.
• Ask for annual dollar estimates at three asset levels, including an explanation of billing dates, valuation rules, and discounts.
• Match every included service to a deliverable, owner, review date, and clearly stated extra-fee rule.

Takeaway

Choose the MFO whose fee schedule you can explain in one page and whose promised work you can verify in your reports and meetings.

Sources

1. SEC, Form ADV Part 2: Firm Brochure