In recent decades, family offices have acquired a certain glow. The single-family office, especially, has become not merely a practical tool for managing complex family needs but an aspirational marker of having arrived.
Recently, we discussed the levels of wealth required and complexity that might turn the single-family office from a “nice to have” into a necessity.
Today, we ask the same questions about multi-family offices. And if there is little consensus about the level of wealth recommended for starting a single-family office, there’s even less regarding the multi-family model.
The range starts “as low as $25 million net worth all the way up to multi-billionaire status,” says Thane Stenner, senior portfolio manager and senior wealth advisor at Stenner Wealth Partners+ at CG Wealth Management, based in Toronto and Vancouver.
For those considering an SFO, “if you try to hire everybody yourself internally, it’s very, very costly,” he says, pointing out that most families don’t need “a $10-billion family-office structure.” Instead, they can take advantage of multi-family office flexibility.
“The family may still have one or two people internally, but they’re getting a lot more resources for a fraction of the cost. They can pay less and pick things off the menu; it’s kind of à la carte,” Stenner says. In addition, a firm representing 30 or more families will be able to secure top professionals.
Multi-family offices offer other economies of scale, Stenner says. For instance, in the increasingly critical area of cybersecurity, a firm that advises numerous families can command broad resources and expertise. The costs of investment research can also be shared by many clients.
“Typically, a multi-family office would see more—arguably, hundreds more—investment opportunities a year than a single-family office would, generally speaking,” Stenner says.
Steve Legler, a Montreal-based senior consultant with Blackwood Family Enterprise Services, proposes a similarly wide range of wealth for multi-family office clients: anything from $50 million up to $500 million.
Since no two family offices provide exactly the same menu of services, “it’s important for the family to take their time and ask a lot of questions, and the good ones won’t mind the questions—or they shouldn’t,” Legler says.
“It’s very important for any client, before walking in, to know how the family office makes their money: Are you charging me a percentage of the assets you’re handling? Are there other fees?” he says. He also recommends asking to speak with other clients: “At Blackwood, when people ask us to help them choose a family office, we invite a couple to talk with them.”
One aspect that’s most often overlooked in the process, Legler says, is family governance. Many firms are capable of managing financial and legal matters, but fewer are able to advise on “soft” topics such as governance structures, dispute resolution and the task of educating the next generation.
“Often, unfortunately, if you ask a multi-family office whether they can help out with the family governance, they will say yes, but when it comes time to do it, they don’t do it,” he says.
It’s very important for any client, before walking in, to know how the family office makes their money.
Steve Legler, Blackwood Family Enterprise Services
Tina Di Vito, head of family office services with First Affiliated Holdings Inc. in Toronto, says that when someone comes into wealth, it’s “their opportunity to try on the tiara.”
Clients go through a phase—they are “trying out their wealth, and they’re doing things they wouldn’t normally do,” she explains. This is often the time when they will explore the possibility of joining a multi-family office.
“The great thing about family offices is that clients are able to get the support they need, but there are lots of companies calling themselves family offices that really aren’t,” Di Vito says.
Families should consider exactly which services they need. “If they can do it themselves or through their existing network, then that’s fine,” she says, “because there are costs to starting a single-family office or joining a multi-family office.”
Colin Keddy, director of TAAG Family Office in Ottawa, says to families who are considering setting up their own SFO and have overhead expenses that are costing them millions of dollars, “Does the juice justify the squeeze?” If costs are too high, “you’re just not going to achieve the value that most people attribute to a family office. Hence, the rise of the multi-family office.”
“I think people very much realize the value of sharing that responsibility with other groups, not to mention that you get the benefit of sharing your experience with other families.”
And the choice need not only be between a multi-family or single-family structure, Di Vito says. “We have some clients who are with single-family offices, but they’ve also transitioned some of their personal dealings to us because they don’t necessarily want their family-office staff, who deal with their siblings and their parents, to handle it.”
This type of hybrid client may engage a separate multi-family office to handle their personal financial matters or those of their children because, although discretion may be sacrosanct within the single-family office, “there are still one or two people who know everything, and you may not want that.”
Steve Beauchesne, CEO of Family Enterprise Canada, says the decision to join a family office boils down to one simple maxim: Start with the family.
“Ask what you want to preserve, what you want to grow, and how you want to work together. Then build the structure that supports those goals,” says Beauchesne, who is based in Vankleek Hill, Ont.
“Sometimes that’s a single-family office; sometimes it’s a multi-family office, or simply better-aligned advisors. The structure itself isn’t the point. “What makes the difference is whether advisors can collaborate and understand the family dynamic.”
Sarah B. Hood is a Toronto-based writer and book author. She has served as editor of three national magazines and written weekly columns for the National Post. She also serves on the editorial board of Spacing magazine. She writes frequently on business, urban affairs and culture. As a food writer, her work has been translated into Japanese and Arabic. She has taught writing at George Brown College for more than 20 years.
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