By Neil Shapiro, TAG Associates Managing Director, Head of Family Office Services
See Part I: The Benefits of a Multi-Client Family Office: Efficient Wealth Management
See Part II: When to Make the Transition to an MFO – Identifying the Signals
Having explored the benefits and identified the signals for when to transition from a Single Family Office (SFO) to a Multi-Client Family Office (MFO), the final step is understanding specific MFO service options and the how the onboarding process works.
This step is crucial to ensure a smooth and seamless transition that aligns with your family’s needs and goals.
If You’ve Met One MFO, You’ve Met One MFO
Meeting one MFO is not like meeting another – each service provider brings something different to the table. While all MFOs will have a mix of portfolio management and family office services, the scope and manner of delivery of these service options can be quite different. For example, the level of customization of financial reporting, average client size and total investment base, and the use of retainer fees vs hourly billing are ways in which one MFO may differ from another.
That means families first need to identify their strategic goals and objectives regarding wealth management and all the services under that umbrella — consolidated reporting, financial management, administrative services, estate planning, and tax planning, among others. Families can then work with the MFO to handpick the services most relevant to their needs, opting for a piecemeal approach that fits their current and future financial goals.
Further, families with SFOs have the option to outsource key services to an MFO and retain other elements internally. This flexible relationship can provide the benefits of both models – the familiarity of the SFO and the efficiency of an MFO. This hybrid approach makes the transition to an MFO not an all-or-nothing proposition, but one that can fit with the family’s comfort level. That arrangement can be a short- or long-term proposition.
Finally, it is advisable to review your family’s needs periodically as circumstances and objectives can change over time. Transitioning an SFO to an MFO allows a family to be both nimble and cost effective with respect to the holistic wealth management and permanent staffing services it requires.
Gradual Transition – Step by Step
The MFO onboarding process should be inclusive and will involve the family in every decision within the process. Ultra-high net worth families have complex investment portfolios, trust structures, lending arrangements, tax structures, privacy objectives and internal politics that take time to understand.
The MFO team typically works with the family to develop an onboarding checklist requesting information about investments, trust and estate documents, family investment vehicles, business holdings, banking relationships, bill payment, philanthropy, key advisor contacts and other material. This information gathering process drives the holistic evaluation and risk analysis that the MFO team will conduct to create an effective and comprehensive family office plan.
If concerns arise around transitioning activities like bill payment and bookkeeping, these operations can be retained within the family’s existing SFO structure and transitioned to the MFO at a future date to ensure continuity or privacy if the parties choose to do so. But as the process gets underway, the MFO team is there to serve the family as if it was the family’s own office.
All transition steps should be thoughtful and deliberate. There is no need to try to transition to the MFO in an expedited way if it generates any adverse relationship, investment or tax risks. A phased approach allows for measured moves, better management of potential risks, and can be important to a family’s comfort as it moves on from its own family office.
The transition from an SFO to an MFO is a crucial decision that requires diligent planning and understanding of the services available. With a customized and gradual transition, families can leverage the benefits of MFOs without a disruption to their existing financial-focused family operations.
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This series aimed to show how to facilitate an informed SFO transition to an MFO, addressing the reasons, timing, service options, and the onboarding process. We hope it was insightful and explained how MFOs can provide all the benefits of an SFO, with significant added cost benefits and expertise, and guidance through the transition.