May 13, 2013

Multifamily Offices Saw Asset, Revenue Growth, New Study Finds

Lack of differentiation among firms MFOs’ top challenge

Multifamily offices enjoyed a 9.6% increase in assets under advisement and 11.3% revenue growth in 2011, according to a study released Monday by The Family Wealth Alliance.

The 9th Annual MFO Study attributed the growth to multi-tiered service offerings, new hiring and use of social media.

The new study included these findings:

  • Firms with less than $500 million in assets grew by an average 13.2%
  • The largest firms, with assets of more than $5 billion, grew by 10.4%
  • The mean MFO client relationship size was $40.9 million (as of Dec. 31, 2011)
  • Firm assets under advisement averaged $7.4 billion
  • 69.6% of MFOs were serving single-family offices, compared with 52.1% in 2009.

“Multifamily offices have worked hard to overcome barriers to growth faced by the industry,” Bob Casey, head of research for The Family Wealth Alliance, said in a statement.

“The No. 1 business challenge cited by participants is the lack of marketplace differentiation for MFOs, their service model and the benefits they can offer to client families.”

The study found participants were addressing the challenge in several ways. Use of dedicated business development officers among study participants rose by 22.9% in 2011. This was a common practice among larger MFOs, but the exception among midsize or smaller ones.

The study also revealed that more than a third of participants had adopted a two-tier pricing and service model. A full MFO service menu charged higher fees at asset minimums of $20 million to $30 million, while a more limited menu with lower asset minimums and fees focused on investments.

Fifty-one firms participated in study, which was conducted in late 2012.

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