Multi-family offices must prove their independence or face irrelevance, a debate at law firm Lawrence Graham concluded last night.
by Josh Spero
Multi-family offices must prove their independence or face irrelevance, a debate at law firm Lawrence Graham concluded last night. 68 per cent of the wealth management professionals at the debate said that independence was the best attribute of the MFO model, far ahead of monitoring (15 per cent), asset allocation (12 per cent) and investment management (five per cent).
Jonathan Bell of Stanhope Capital said: ‘We need to position ourselves between single-family offices, which have the alignment with their client’s interests but not the depth, and the big banks, which have the expertise’ but are always pushing their products. ‘We need to be a hybrid – there’s no point having independence without expertise.’
However, one of the issues in the debate was whether MFOs, with their relatively few analysts, could cover enough of the waterfront in sufficient depth.
Charlie Hoffman, managing director of HSBC Private Bank, said MFOs were appearing far too quickly, lowering the reputation of the sector: ‘Every man, woman and dog is dragging a client out of a private bank and calling themselves an MFO. They’re risking implosions for their clients.’
Another senior figure from a major private bank was equally critical: ‘It makes sense to have your own advisors if you are a single family, but you can’t do that for a big group of people: that’s what wealth managers do. MFOs are simply an intermediary between SFOs and multinational banks; it’s the disappointment on the client’s part and their lack of confidence in the wealth managers giving them personal, relevant and well-priced services which caused people to have their own advisors.’
Although he conceded that the big banks’ ‘corporate culture’ prioritised the selling of product and that MFOs were perceived to be more trustworthy, he said their research capability,large balance sheets and accountability should make them much more attractive.
Other questions voted on reflected the need for independence (65 per cent felt MFOs should not have products to sell), but there was ambivalence about how absolutely useful or beneficial they were: 45 per cent felt MFOs were a viable alternative to private banks, while 45 per cent were unsure, probably reflecting the vested interests of the audience’s private bankers and MFO managers. MFOs were felt to add value by negotiating lower fees from managers, but 87 per cent were worried that an MFO with a dominant family could skew investment interests.
Jonathan Guest of Marcuard Family Office felt that MFOs were dealt with poorly by big banks: ‘We’re treated as a financial intermediary. We’re not well-served – they look at us as a difficult project, and we get called at the end of the day,’ as if an after-thought.
Three-quarters did not mind about MFO staff being remunerated for bringing in new business, but in the debate Charlie Hoffman challenged Guy Paterson (on gardening leave in between leaving Unigestion and joining Stanhope) over whether this would lead to unmanageable amounts of money being brought in or MFOs’ interests being skewed to increasing AuM rather than dealing with what they had. Paterson said it was reasonable to reward staff for introducing new clients.
The debate was co-hosted by Caroline Garnham, partner in Private Capital at Lawrence Graham and founder of the Family Bhive, and Sebastian Dovey of Scorpio Partnership.