Regulatory pressure and client demand is driving a wave of consolidation as many single family offices (SFOs) acting for wealthy cross-border families look to join multi-family offices (MFOs), according to a MFO head.
"In the past year we have been hired by several SFOs who decided, with the US new rulings, to be regulated and register," said Santiago Ulloa, president of US-based GenSpring Family Offices International.
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"It didnt make sense for them to keep being a SFO with their own staff it makes more sense to hire multi-family offices to do part of the work."
Ulloa said in the future, MFOs will need to have a minimum of $5bn in assets under management (AuM) to be profitable enough, and have the scale, to comply with the rising raft of regulation in the US and Europe.
Family offices need logistical support
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By GlobalDataHe said SFOs are looking for logistical support on tasks as broad as investment advice to asset allocation, due diligence to accounting, as the web of tax and regulatory compliance gets more complex.
GenSpring has about $20bn in AuM with 650 families from 23 countries serviced by 350 employees, this gives it a client:staff ratio of almost 2:1 an enviable, but costly, proportion to maintain.
Ulloa is adamant that being a truly global family office, with offices around the world, is difficult to accomplish but the opportunities are there.
"Cross-border and international business will be growing a much faster rate than domestic (US) business," he said.
"If you want to be a global player it is impossible to do it unless you partner with someone else. You need to have the local knowledge to give advice locally," he said.
GenSprings international clients represents about 15-20% of its total client base, with the bulk being from Latin America and Southern Europe.
About 80% of its business comes from US citizens or residents.
Consolidation driven by customer demands
Ulloa said the consolidation is part of a wider trend towards more specialised advice, driven by client distrust of product-pushing banks.
"Independent advice will be a really strong pillar in the future, because clients are looking for transparency, for someone to trust," he said.
"At the same time, they understand and they need product to invest so there will be room for everyone."
"But the model of how clients have been advised in the past is going to change and is changing already," he added.
"Clients want someone to help them to buy in the right vehicle, at the right price, in the right legal structure for them," he said.
Ulloa is equally clear that this future involves a clearer separation between bank, adviser and client.
"We think the only way of selling this independent advice is by being paid by the client. If you are having another source of income, one way or another, you have a conflict of interest," he said.
"Advisers have to decide where they want to serve the clients and what they want to do for them. You cannot do everything. You cannot be the factory, the distributor and the adviser."
