Consolidation has transformed the wealth advisory sector, with firms racing to build scale through acquisitions. But some high-net-worth investors say the trend is creating opportunities for smaller multifamily offices that offer a more personalized approach.
One prominent example is Pathstone Family Office. The firm has completed more than 15 acquisitions over the course of 14 years. Its acquisition of Hall Capital Partners pushed its assets above $100 billion. Other firms to follow a similar strategy include Corient and Focus Financial Partners.
While larger firms can offer broader resources and services, some wealthy families say growth can come at the expense of personal relationships and customized advice.
“We’ve seen a number of principals recently realize that they don’t want to be part of a huge organization. They enjoyed the personalized service they had originally and are looking to have it again,” said David Chie, founder of family office recruiters Palo Alto Staffing and Maple Drive.
Some families also worry that larger organizations, with more employees and higher turnover, create additional privacy concerns and make it harder to get personalized investment and tax advice.
Research firm Cerulli Associates published data last month that said that wealth managers should prioritize high touch services if they want to retain clients.
One private investor, the founder of a small VC fund of funds, said that he left an RIA after it expanded and switched to a smaller multifamily office.
“We’ve since seen better alignment and stronger outcomes, which has made all the difference,” said the investor, adding that the smaller multifamily office’s investment approach is akin to that of a high performing foundation or endowment, or a very large and professionalized SFO.
Ted Nield, CEO and CIO at Gresham Partners, an MFO with around $10 billion in assets, said: “The industry is moving in the direction of roll ups, scale, and expediency, not performance and client service. I think the industry is moving in the wrong direction.”
Some families are taking the trend a step further by establishing their own single-family offices. This involves recruiting CIOs to take on investment strategies, CFOs that are responsible for portfolio positioning and tax implications, and CEOs who can oversee governance and organizational issues like succession.
Geoff George, CIO and family member at Viewpoint Asset Management, a relatively small single-family office in New York, said that the family opted for the SFO route because of the familiarity that having your own team brings. The principal wanted a team they “know and can trust,” even if the SFO structure is probably overly complex for the family’s day to day needs.
Advocates argue that smaller organizations can pursue more specialized opportunities.
Larger wealth managers tend to manage so much money that they “can’t get access to the interesting, niche investments” and instead rely on “generic, run of the mill solutions,” said Nield.
George said operating as a lean SFO has given him access to deals he would never have had as part of a bigger operation. “My network gives me insight into things that I don’t think others could,” he said. “We have a very unique deal sourcing system, and it has been a huge source of investment alpha for us.”
