Why are Multi Family Offices (MFO) so relevant?
familyofficehub’s research team has been dealing with the investment scene in Germany and Europe for years. We analyse deals and identify the most important players in sectors that are difficult to understand. With our lists, we enable uncomplicated access to companies that often operate in secret. Multi Family Offices (MFO) are particularly important in this context, so that we offer a list of the largest German Multi Family Offices as well as a list of the most important European Multi Family Offices. But what makes these MFOs so relevant? First of all, they offer direct access to the richest families in Germany and Europe. They are in close contact with High Net Worth Individuals (HNWI), who are very frequented not only because of their financial strength. The influence of the richest families in a country extends over the economy, culture, politics and many other areas. Furthermore, multi-family offices are of great importance as they actively participate in asset management and are responsible for investments in millions of euros. Especially in the course of fundraising, MFOs should be observed and approached.
Basic Definition: Multi Family Offices as Asset Managers for High Net Worth Families
Multi family offices can be defined as companies that manage the assets of very wealthy families. In contrast to single family offices, MFOs serve several families simultaneously. The number of clients in a multi-family office varies greatly between different companies and ranges from a few to a double-digit number of HNWIs. Although the range of services offered may vary widely (see below), these companies share a discrete approach and a responsible approach. The word “Multi Family Office” is not protected, so that any company can basically describe itself as such. The inflationary use of the term has led to more and more companies using the term for their services. What distinguishes Multi Family Offices from traditional asset management companies and banks can be found below in our definition.
Distinction between asset manager, private bank and multi family office
Family assets are not only managed by MFOs, but also by traditional asset managers and some exclusive private banks. Most of the larger banks also have a department specialising in HNWI. But how can multi-family offices be distinguished from these institutions? We use two criteria for this. On the one hand, the families’ assets must be extraordinarily high and usually amount to at least eight figures. On the other hand, according to our definition, multi-family offices have the aim of being comprehensively and profoundly active for the families they advise. This means that their services go beyond pure investment advice, are geared to the long term and are characterised by a close, trusting cooperation. In contrast to the traditional banking environment, they actively support the family’s “day-to-day business”.
A wide range of MFO activities: These services are offered by Multi Family Offices
A clear definition of a multi-family office is particularly difficult due to its diversity. In principle, MFOs can be divided into those that offer financial services and those that offer non-financial family office services. Some multi-family offices are active in both areas and offer “holistic” family office services. Financial services include asset management, portfolio monitoring and cash flow management. Active investment activities such as real estate investments or private equity or venture capital deals can also be classified as financial services. Furthermore, reference is made to topics such as risk controlling, tax consulting or succession planning. The non-financial services are just as diverse and range from legal advice, travel planning, art management, chauffeur management and (educational) planning for children to general administrative activities. There are no possible limits in this field, and it is difficult to include all components of the service portfolio in our definition.
How are Multi Family Offices created? Explanations and examples
Multi family offices typically arise from three different occasions. Traditionally, Multi Family Office services develop out of an asset manager’s offering. Asset managers are particularly keen to appeal to high-net-worth HNWIs, as this is where the greatest leverage is possible. If a company can establish itself in that industry, the entire business model is often geared to wealthy families. The change from an investment advisor and manager to a multi-family office is therefore comparatively common. An example of a multi-family office that was previously a classic asset manager is the Tonn Family Office in Hamburg (see also our article on the largest multi-family offices in Hamburg). Another origin of Multi Family Offices lies in the management of the assets of an initial family. In order to be able to work with even more managed capital and pass on the experience to other clients, additional families are taken on and looked after. The Bad Homburg Family Office HQ Equita is a good example of an MFO that emerged from a wealthy family. The third typical case of a multi-family office is the establishment of a new HNWI asset management company by experienced family officers and client advisors from private banks. Years of experience in advising high-net-worth clients have given these managers the opportunity to set up their own multi-family offices.
Picture source: Annette Schuman