Accounting and Consulting
Managing family wealth
Reasons to engage a multifamily office to oversee your financial affairs
By Lisa Murton Beets
Smart Business Detroit | February 2008
Steven Y. Patler, JD, CPA
Managing director
The Prosperitas Group LLC
Who wouldn’t want an office of
experts managing their financial
affairs and planning for their family while also providing relief from the mundane aspects of wealth?
“With the creation of multifamily offices,
the benefits of a traditional separate family
office can be achieved at a substantially
reduced cost while at the same time keeping the financial affairs of each family completely separate and confidential,” says
Steven Y. Patler, JD, CPA, managing director with The Prosperitas Group LLC in
Bloomfield Hills, Mich. “It provides a solution for families who don’t want the administrative burdens or can’t justify the costs
of establishing their own family office.
Objectivity and independence are key indicators that separate a real multifamily
office from an organization that claims to
be a family office.”
Smart Business asked Patler what types
of families would be best served by a multifamily office.
Why would someone want to use a multifamily office rather than a single-family office?
The most obvious benefit is cost efficiency. Single-family offices generally will not
make sense for families with a net worth of
less than $100 million. On the other hand,
multifamily offices have much lower net
worth thresholds. In fact, many existing
single-family offices have closed and their
families have become clients of multifamily offices. Besides the obvious cost efficiencies, a multifamily office has greater
buying power. This makes it possible for
clients to have greater access to investment vehicles and potentially with lower
fees. Furthermore, the multifamily office
advisers typically will have broader and
deeper experience because they are regularly exposed to the challenges faced by
many different families.
Describe a good candidate for a multifamily
office.
Basically, a multifamily office can be beneficial to most high-net-worth families/individuals. This could range from a widow or
widower with significant investment assets to a large multigenerational family that
runs its own business, to a business executive who does not have the inclination or
time to properly attend to his or her own
financial affairs. Those experiencing a liquidity event, such as selling a company, are
also good candidates. Furthermore, a multifamily office can serve an important role
in providing much needed continuity for
the family at times of illness or death.
What types of services does the multifamily
office provide?
The specific services provided by a multi-family office should be tailored to help
achieve each family’s particular goals. A
multifamily office serves as a CFO or quarterback of the family’s financial affairs in
addition to the role of high-level concierge.
It protects the family, manages what they
have and helps them plan for the future.
Specific services can include integrated
financial, estate and tax planning; risk management; family governance and philanthropy; monitoring third-party service
providers; bill paying; and consolidated
reporting. Not all multifamily offices are
the same. Some are heavily investment-oriented and outsource most of their tasks,
while others are more comprehensive and
have employees from a broad range of disciplines. Many are ‘open shops’ that are
able to coordinate and integrate with a
family’s existing professionals to produce a
team approach.
Why don’t more people use multifamily
offices?
Most significantly, many people are
unaware of what a multifamily office is and
how it can help their family. Although the
concept of family/multifamily office is not
very well known, the number and size of
multifamily offices has steadily grown
throughout the country in the last 10 years,
mainly through word of mouth from multi-family office clients and estate-planning
attorneys.
Some people attempt to manage their
own affairs or mistakenly think someone
else is actually ‘looking out’ for them. We
have seen examples where someone dies
and his or her spouse, with no financial
experience, is left vulnerable to unethical
behaviors by some so-called advisers.
Another reason people may not consider
a multifamily office is because they think
you have to be extremely wealthy. As mentioned earlier, this is not necessarily the
case. A multifamily office makes it significantly more affordable to get independent
and objective professional assistance.
What is the fee structure?
Some firms charge an hourly fee, while
others charge an asset-based fee. For some
clients, a more attractive alternative may
be to set a fixed fee based on the nature
and complexity of a family’s situation. A
fixed fee promotes increased communication and trust since the family members
will not feel like the meter is running every
time they call their multifamily office advisers. I know I am best able to serve my families the more frequently we talk.
STEVEN Y. PATLER, JD, CPA, is a managing director of The Prosperitas Group LLC, Bloomfield Hills, Mich. Reach him at (877) 540-5777 or spatler@cendsel.com. For more information, go to www.prosperitasgroup.com.
