Multi-family office executives overwhelmingly say their firms are in a stronger competitive position compared to three years ago, according to The Family Wealth Alliance’s seventh annual multi-family office study. The confidence is based, among other things, on their investments in technology, professional staff and business process improvements.
Four out of five participants (78.9 per cent) said their firms are in a stronger position today than three years ago. MFO executives expect their growth in assets to accelerate to an average of 14.9 per cent over the next three years.
The rapidly growing MFO industry provides integrated wealth management services to families with a net worth typically in the $30 million to $300 million range. The mean asset size of participating firms was $4.97 billion, with the median firm reporting $999.2 million in assets. The Family Wealth Alliance estimates that these firms represent just over half the population of North American MFOs and about 90 per cent of total MFO assets.
“Multi-family offices are back on the path to growth,” said Thomas Livergood, chief executive of The Family Wealth Alliance. He noted that the $357.3 billion in assets of participating firms compares to $192.5 billion among participants five years ago. “The MFO model continues to gain traction in the marketplace and future prospects remain very bright.”
The study, the results of which will be announced later today at the Alliance’s Fall Forum in Oak Brook, Illinois, found that MFO execs continue to describe human capital issues as their top challenge. Those issues include recruiting, employee development and compensation.
The number two challenge is business development, while technology ranks third. Consolidated reporting, systems integration and business process automation are among the technology issues that appear to be of concern to many MFOs.
Mergers, meanwhile, have been offset by steady new business formation. This year's study included four participants that were 2010 start-ups, two of which immediately attained critical mass in terms of assets under advisement: Covenant Multifamily Offices of Covenant, Texas, with $800 million under advisement, and Pathstone Family Office of Englewood, New Jersey, with $2 billion in assets. The other two start-up participants were Greenway Family Office of St Louis, Missouri and Madison Family Office Services of Sunrise, Florida.
Less than half (45.5 per cent) of MFOs that are owned by their principals or partners report having a succession plan in place. Where a plan is in place, most (61.8 per cent) call for selling the firm to the next generation of principals or partners.
Seventy-two firms participated in this year's study. Assets under advisement of participants grew 8.2 per cent to a total of $357.3 billion at the end of 2009, with an average client relationship size of $49.6 million.
The findings of the FWA’s third annual single family office study, also released today, can be found here.