Multifamily-offices assets up sharply in 2007; especially for smaller firms. Wealth-management firms that provide integrated wealth-management services to families worth, typically, between $30 million and $300 million managed to increase assets under advisory by 12.1% in 2007 despite a difficult investing climate that saw the S&P 500 gain just 5.5% for the year, according to a survey of multifamily offices by the Family Wealth Alliance (FWA).

Altogether, the 83 U.S. firms in the FWA's last multifamily office survey, its fifth, had $333.8 billion in assets under advisory last year, which the FWA says represents about 90% of the industry's assets in 2007. The average relationship size was $49.0 million.

To be included in the FWA study, firms had to have a client base made up mainly of ultra-wealthy multi-generational families and provide a broad roster of family-office services.

Year over year, firms with $5 billion or more in assets under advisory increased assets by 11.5% , those with between $1 billion and $5 billion gained 15.8%, firms with between $500 million and $1 billion grew assets by 21.2%, and those in the under-$500-million bracket saw an aggregate increase in assets under advisory of 22%.

Across all asset levels multifamily offices saw a 25% increase in the number of client relationships.

Proaction

Just as interesting, 51.4% of the firms polled by the FWA took measures last year to blunt the impact of widespread financial-market turmoil on their clients' holdings.

Among a litany of defensive initiatives undertaken last year by ultra-high-net-worth advisories were closer credit monitoring of securities issuers and counterparties, reducing fixed-income allocations in favor of cash, avoiding collateralized or high-yield debt and switching to money-market funds that invest only in U.S. Treasury securities.

"The rough waters in the financial markets have presented a major challenge to multifamily offices over the past year," says Robert Casey, head of research for the FWA.

But multifamily offices were able to shake off this challenge -- and other obstacles such as a shortage of qualified candidates to fill vacancies -- in what amounts to an affirmation of the acceptance of the multifamily office value proposition, according to Casey.

The difficulty of finding professionals suited to advising ultra-high-net-worth families has gone from being "a serious concern" to a painful problem that can sink an organization's basic strategy and may be helping to drive industry consolidation," according to the FWA report. One in four of the firms surveyed reported a senior level personnel vacancy in 2007, up from 18.6% in 2006. Nearly three-fourths of the firms with a senior level vacancy said they have engaged a recruiter, up from just 36.4% in 2006.

One in five of the firms surveyed said they'd been involved in a merger within the past three years. Of those, 27% said the merger in question was union of roughly equal-size firms and 647% said it was a matter of a big fish eating a smaller one.

Only 12.5% of firms with more than $5 billion in assets under advisory said they were "likely" or "somewhat likely" to acquire a smaller firm in the next 12 months. Meanwhile 44.5% of firm with less than $500 million in assts figured they were either "likely" or "somewhat likely" to be involved in a deal within the next year.

The FWA is a Wheaton, Ill.-based consultancy to ultra-high-net-worth families.

This year, as a companion to its Multifamily Office Study, the FWA is coming out with a report on single-family offices. -FWR

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