Traditionally, individual family offices have focused resources to facilitate a common interest in asset protection, cost control, financial education, family philanthropy, as well as a host of unique needs for particular family groups. These family offices developed as a haven of influence and stability for families of wealth who want to ensure the preservation and growth of their family's financial assets and heritage.

Now a new niche is emerging among some of the most progressive family offices. This growing segment is being labeled the "multi-client family office" (MCFOs). These MCFOs are comprised of family offices that offer their services to more than one family of exceptional wealth. Some of these offices are even crossing international boundaries.

MCFOs have evolved in different ways, but most exist to serve a unique set of family group needs. Family Office Exchange currently tracks more than 30 organizations in the United States that consider themselves MCFOs. Not all have reached a level of service and sophistication that make them a force in the marketplace, but sophisticated investors are watching at least 10 MCFOs which are setting the standard in professionalism and quality service.

MCFOs that are in place range from long-established family offices such as Whittier Trust Company and Laird Norton to family groups such as Rockefeller & Company and Minneapolis-based Family Financial Strategies. One notable non-family financial service group is The Pell Rudman Trust Company located in Boston and Washington, D.C.

Starting a multi-client family office should not be undertaken lightly. There are many unique challenges inherent in serving the diverse and sometimes unpredictable demands of any family client. Expectations of service and performance levels within this distinctive group are very high. Family Office Exchange has found that the successful MCFO models have met the demands of their niche market by remaining flexible and service-oriented.

The best MCFOs have the following characteristics:

• They provide an extensive menu of services focused on integrating the financial disciplines that are relevant to the exclusive needs of a family group.
• They find the best professional advisors who can deliver comprehensive financial services to clients, rather than individualized products or services.
• They deploy assets and services in a cost effective manner.
• They employ "relationship" fee structures that appeal to family investors and are competitive with traditional financial institutions.
• They establish volume discount rates on important service areas such as master custody, investment management, and trust administration.
• They use technology to its fullest advantage to enhance reporting, communication, and decision-making. Taking a closer look at the multi-client family office, we find there are several factors that have contributed to their success. These factors all work together to predict success in this new environment:
• A family group or professional advisor with an impeccable public reputation.
• A clearly defined wealth management process and written investment policy for each client.
• Tax efficient diversification strategies including non-traditional assets classes.
• A proven investment track record ‚ three years minimum ‚ and a long-range focus on investing.
• Privacy and confidentiality for all clients.

While all of the benefits of MCFOs are not yet evident, families who participate find they have most of the advantages of dedicated offices. Here is what we are seeing:

• Participating families have access to a wide array of integrated services that are not collectively offered anywhere else;
• Families participate in the cost-savings and the benefits of group purchasing power;
• These families find they maintain more direct family control over financial matters;
• They have the assurance of confidentiality in the management of financial and personal affairs; and
• They have the satisfaction of affiliating with an organization with goals that are aligned with those of their family.

This creative integration of specialized services can extend far beyond those of other financial institutions. The inherent service orientation provides a powerful dynamic to seek even more ways of leveraging buying power and an expanding knowledge base for this special niche in the wealth management industry.

If you would like to know more about the multi-client family office concept, please contact Jane Flanagan at Family Office Exchange, 708-848-2030 or via email at jflanagan@familyoffice.com.