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New interest from advisers in moving to multifamily offices

Making a move to a multifamily office is piquing the interest of financial advisers with high-net-worth clients.

“We’re seeing lots of interest in MFOs, and I think you’ll see more as the market improves and clients are less afraid to make a move,” said Tim White, a partner with Kaye/Bassman International Corp., an executive search firm based in Plano, Texas.

“Look, the rich are different: They want a higher level of service. They can get that at a multifamily office,” Mr. White said.

Danny Sarch, president of Leitner Sarch Consultants Ltd., a recruiting firm based in White Plains, N.Y., agrees.

“Advisers of high-net-worth clients are looking for alternative solutions right now, and multifamily offices are seen as places that can provide clients with trust and estate and concierge services, and are less bureaucratic and more entrepreneurial,” he said.

Although interest is there, advisers looking to score big bucks at multifamily offices will probably be disappointed, industry observers said.

“A broker-dealer is a higher-beta-type job,” said William Rankin, chief executive of New York-based Shelterwood Financial Services LLC. “Multifamily offices are not keyed to transactions but to long-term relationships, so an adviser would start slower, but the rewards can be very substantial over time.”

On the plus side, an adviser who brings high-net-worth clients to the new firm will receive a transition package for one or two years that includes a base salary and a percentage of the revenue that they bring from the existing relationships, Mr. Rankin said.

The major incentive for joining a multifamily office is the opportunity to become a partner and share in the firm’s profits, Mr. Sarch said.

“There are no set rules for compensation at multifamily offices, but making partner is the goal,” he said.

Mr. Rankin agrees.

“A multifamily office tends to be a professional practice with a boutique orientation. People are working in a round-table environment with other professionals they respect,” Mr. Rankin said.

“It’s not independent brokers managing their own books of business,” he said. “Things aren’t based on a fixed formula.”

There is a high degree of interest in jobs at multifamily offices of late, but demand is limited, and hiring tends to be slow, according to industry observers.

“A year ago, I had zero inquiries from advisers about working for us,” said Charles Lowenhaupt, chief executive for Lowenhaupt Global Advisers LLC of St. Louis. “In the past six months, I’ve had 60.”

However, for all the calls that he has received, Mr. Lowenhaupt, whose firm has $552 million in assets under management, hasn’t hired anyone yet, though he is talking to three candidates.

“It takes a long time,” he said. “Families want to get to know [the candidates]; it’s all about trust.”

Similarly, Mr. Rankin, whose firm manages or advises on about $200 million in assets, has made only one hire so far this year, bringing aboard Colleen Manley, a trust and estate attorney from Phoenix, as a senior wealth and legacy adviser in March.

“You want to make sure there’s a cultural affinity, a compatibility of the service model and that the client profile works,” Mr. Rankin said. “There’s a natural screening-out process.”

Meanwhile, the success of the multifamily-office model appears likely to inspire more to open, industry observers said.

“It’s an attractive wealth management model,” said Steve McCarthy, an industry consultant and senior vice president of KCG Capital Advisors in New York. “It’s not product-driven and promotes stewardship, and is stable and holistic.”

According to a study on multifamily offices released today by New York-based Rothstein Kass, a January survey of 110 investors who have moved part or all of their assets from one financial provider to another this year showed that 40% said a family office was their provider of choice. All the respondents had investible assets of $1 million or more.

High-net-worth families are “gravitating to the family office model because of the holistic ap-proach to wealth management and personalized attention that they can provide,” said Rick Flynn, a principal and head of Rothstein Kass’ Family Office Group.

Multifamily offices’ ability to share resources to create economies of scale, and offer due diligence and open-architecture platforms, is also contributing to their popularity, he said.

E-mail Charles Paikert at [email protected].