When a raft of family offices were ranked by a news organisation, three of the largest turned out to be banks, suggesting the sector has a definition problem.

With the fast pace of financial news it is occasionally smart to look back further than the latest 24-hour period.

A global ranking of multi-family offices, issued last December, put HSBC Private Bank, Citi Private Bank and Northern Trust as first, second and third respectively on the basis that these banks contain such organisations and if these units provide direct and “comprehensive” investment services to high net worth families.

The ranking, by Bloomberg carried the title, The Richest Family Offices, Ranked. The story went on to clarify that no single family offices are included – noting how discreet and publicity-shy they tend to be – and said: “Family offices that are part of private banks are included if the bank has a unit that offers direct and comprehensive investment and noninvestment services to high-net-worth families. Figures for AuA included only assets managed by the family office unit of the bank. For non-bank family offices, AuA includes wealth directly managed by the offices and funds outsourced to money management firms. Money managed for private foundations is included. Money managed for pension funds is excluded. Insurance policies and trusts on which advice is provided are included.”

Bloomberg said HSBC Private Bank had $160 billion of assets under advisement as at March 31, 2015, a year-on-year gain of 11 per cent, serving a total of 334 families; in second place, Citi Private Bank had $107.3 billion of AuA, a gain of 7 per cent (Bloomberg said “non-applicable” as far as the number of families are concerned); in third place, with $106.1 billion of AuA, is Northern Trust, serving 4,678 clients. In fourth was Bessemer Trust, at $105 billion, up 9 per cent, with more than 2,300 clients; in fifth place was BNY Mellon Wealth Management, at $86.5 billion, up 6 per cent, with 430 clients. Other names in the rankings included Switzerland’s Pictet, UK’s Stonehage Fleming Family & Partners, and US-based Abbott Downing (part of Wells Fargo); US Trust Family Office (part of Bank of America); Atlantic Trust; Wilmington Trust; Glenmede; Silvercrest Asset Management; Geneva-based Bedrock; BBR Partners (New York); CV Advisors (Miami, FL), and Sandaire Investment Office (UK).

Some industry practitioners might conclude that such a ranking demonstrates a major problem in how the term “family office” is used. Is a multi-family office fully deserving of the title if it is an appendage of a large banking group and if so, what level of independence is granted beyond what might be secured by a more traditional service offering for UHNW individuals at a private bank? At what point do such structures simply become wealth managers for the ultra-rich if so, how do firms in this space convince clients what they get is worth the cost?

The definitional issue gets even more complex when, as Bloomberg noted at the time, not all of the entities in the list are unlisted parts of other organisations. New York-headquartered Silvercrest, for example, is unusual for being the only multifamily office in the ranking that is publicly traded. 

Explaining its methodology, the report said it compiled information self-reported by multifamily offices and surveyed more than 1,000 firms worldwide, using a database of contacts obtained from Key Biscayne, Florida–based FamilyOffices.com. It received responses from 98 firms.

It may well be that in the broader scheme of financial services, quibbling about what counts in a ranking of family offices might seem petty and a waste of time. However, given the relative dearth of clear and transparent data on the charges and fees of firms in this space, the inclusion of large banks in such a ranking shows the need for a tight definition remains urgent. The editors at this publication will be delighted to hear views from our readers on this issue. 

To see an interview by this publication of a practitioner in the field about the term "multi-family office", click here.