When Ian Rosmarin returned to Canada after working for about a decade with a U.S. Fortune 500 company, he looked for a firm that could offer independent investment advice in an unbiased and conflict-free way.
“He wanted the type of advice that is provided to institutional investors,” says his son, Jeremy Rosmarin.
In those days, the elder Rosmarin was unable to find a Canadian company offering that type of service, so in 1997 he started his own. As he acquired expertise in the field, friends approached him for investment research and consulting services as well, so he gradually expanded the business into a full-fledged multi-family office.
“Prime Quadrant did raise money from other investors, but I wouldn’t have called it a family office until 10 years ago,” Jeremy Rosmarin says. In the beginning, “one of those investors came to him and said, ‘I really want you to help me with my entire picture.’”
Today, Prime Quadrant provides independent investment consulting services to more than 150 wealthy families, advising on assets of about $15 billion. Along the way, the company has also responded to the needs of its client families, consulting on related topics such as family governance, social capital and succession planning.
“That was not available, and that’s what he wanted to have,” says Jeremy Rosmarin, who now serves as Prime Quadrant’s principal and managing director. (His father holds the title of chairman emeritus.)
‘I’ve seen it start with one family’
Family offices serving more than one family, once a rare commodity in Canada, have become more common. Some, like Prime Quadrant, develop spontaneously when a single-family office expands to embrace a wider range of clients, an evolution that offers benefits to all parties. The most important first step is to determine that it’s the right fit for the families in question.
The process can begin in a number of ways, says Shai Dubey, adjunct assistant professor and distinguished faculty fellow of business law at Queen’s University in Kingston, Ont.
“I’ve seen it start with one family and then bring others in; I’ve seen families that have been close decide, ‘Let’s do this together because we can share more resources,’ or the advisors of the families may know the others.”
A clear attraction is the potential to share costs. “You’re not going to be hiring people who are just starting out; you’re bringing in talent,” Dubey says. “The rule of thumb in the U.S. – I’m not sure that there is one in Canada – is that you can expect to pay 1% to 1.5% on every dollar that you have in staffing costs.”
Family offices step up to help with complex, private and worrisome health issues
Family offices are flourishing – and like snowflakes, no two are alike
The Chicago-based Family Office Exchange (FOX) is one model for a multi-family office: it operates as a peer-to-peer exchange for business families and family enterprises. Ed Giacomelli, FOX’s market leader for Canada, says that often a family office evolves out of a major change or event.
A decision is taken to sell the operating business, for instance, and that capital is going to be redeployed, he says. “The other driver is being fair to all the next generation, not only those who have an interest in the operating business.”
But the former owner is “now in an area outside his area of expertise, so [he or she is] going to bring the best and the brightest in to satisfy [their] needs and objectives, and it can be costly to set up a family office, with the right CEO, the right CFO and the right administrator,” Giacomelli says.
Bringing more families into the office obviously offers the potential for cost-sharing and may provide for a bigger staff with a wider range of specialized expertise.
But a multi-family office is not for everyone, and some families may be reluctant to let go of their proprietary relationship with their advisors.
“The movement into a multi-family office is an intriguing proposition, but not many single-family offices go in that direction. If families are aligned in asset allocation, then you can perhaps get economies of scale,” says Giacomelli. However, it may be challenging to determine how costs will be divided if some families end up using more services than others.
Confidentiality in question
Thus, says Shai Dubey, making careful hiring decisions, and coming to an agreement about how much each hiree will be paid, is critical. This is especially true in cases where some family members end up working in the family office and are involved hands-on in making investment decisions; Dubey says that this situation can lead members of the other families to fear a loss of confidentiality.
If someone is considering moving from a single-family office to providing advice to other families, Rosmarin says, “I would say they have to be missionaries and not mercenaries. Making the transition from managing your own capital has to be about more than the money; it’s about having a mission and vision that really represent the level of the families.”
In the end, he says, “whether single-family or multi-family, I think it’s important to surround yourself with great people and get those people to be providing impartial advice. Whether those are full-time employees, trusted professionals or a combination thereof, that’s a tactical or strategic consideration.
“I really think the most important thing is to help people discover for themselves what they would like to achieve by actually listening to them,” he says, “and then work with them consistently or over a long period of time to determine what success looks like and helping them create a plan to help them get it done.”