Transitioning from a registered investment advisor to a multi-family office

Thursday, July 9, 2020 | By Neill Reilly, Director of Business Development, Family Wealth

Transitioning from a registered investment advisor to a multi-family office

The decision to transform from a registered investment advisory (RIA) business to a multi-family office (MFO) can be challenging. On the one hand, an MFO typically has fewer, but more profitable, clients, but catering to the needs and expectations of ultra-wealthy families means some key differences from a traditional RIA.

As clients of MFOs, families are looking for sustainability of the family wealth, culture and history from one generation to the next, making education and communication critical. A multi-family office is different from a high-end wealth manager in that it caters to multi-generational families. Many of today’s multi-family offices evolved out of single-family offices, but a growing number are evolving from RIAs, which don’t face any further requirements beyond their existing SEC registration. Wealth managers that evolve into MFOs tend to do so organically, typically landing one or more exceptionally wealthy clients before deciding whether to focus on similar clients.

One challenge that MFOs face is mastering such a wide range of services and capabilities, such as delivering “single-family service” at scale across multiple families. This means helping clients manage very complex financial lives, from a spectrum of investment categories to concierge services. MFO advisors must also remain free of conflicts of interest.

Financial planning rather than individual investments is the key element for an MFO. Advisors who built their business selecting stocks, bonds and mutual funds must advise MFO clients on hedge funds, private equity, private debt, venture capital, real estate and real asset fund managers. A complete financial picture also includes bank accounts and ensuring the family has the liquidity for large purchases and vacations.

MFO expertise must encompass more than just investments, offering advice in tax planning and strategies, legal decisions, philanthropic activity, and trust and estate planning. They must also become experts in intergenerational dynamics. Younger family members may have different ideas about their money than their parents,

One of the biggest challenges to MFOs is operational readiness. Security, privacy and confidentiality are major issues for wealthy families. Many firms struggle to move away from “manual and spreadsheet” mode without adding staff and driving up costs. A technology and operational services outsourcing provider can help support evolving businesses.

To learn more about the transition from RIA to MFO, and to find out how SS&C’s comprehensive suite of technology-powered services can help, download our whitepaper Transitioning from a Registered Investment Advisor to a Multi-Family Office

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