The multi-family office industry grew its assets by an estimated 16 per cent in 2012 to over $500 billion, while the number of client relationships rose 3.7 per cent, Family Wealth Alliance finds.

The multi-family office industry grew its assets by an estimated 16 per cent in 2012 to over $500 billion, while the number of client relationships rose 3.7 per cent, according to the Family Wealth Alliance's annual Multi-family Office Study.

The Wheaton, IL-based research and consulting firm attributed the growth in assets to a “resurgence among large banks,” whose MFO businesses have lagged those of smaller competitors over the past decade, it said.

“The big banks have gotten their acts together and become much stronger competitors in the family wealth market over the last couple years,” said Thomas Livergood, chief executive of the Family Wealth Alliance.

“We're seeing aggressive efforts among banks to improve their game. They’re making acquisitions, rebranding, and refocusing on the multifamily office space,” he said.

For example, MFO assets of the ten largest competitors - all of which are banks or bank affiliates - now total around $350 billion, or 70 per cent of the market. This is up from the mid-60 per cent range two years ago, FWA said, citing Alliance Research estimates.

FWA's study - the tenth of its kind - pointed to four bank units as among those it said are leading the resurgence. They are: Abbot Downing, the Wells Fargo MFO unit ($32.2 billion in assets); Ascent Capital Management, a US Bank subsidiary ($4.8 billion); CTC Consulting/Harris myCFO, owned by BMO Financial ($34.5 billion); and Hawthorn, PNC Family Wealth ($23.1 billion).

In other related observations, the firm noted that MFOs are increasingly taking on single family offices as new clients for “a la carte services,” with 68.4 per cent of respondents in the latest survey saying they now serve SFOs, versus 52.1 per cent five years ago.

Specifically, investments/external chief investment officer, administrative services, family governance and succession planning, integrated wealth management and client reporting were among the most popular services for SFOs, according to the report.

Meanwhile, it was also found that overall employee headcount at MFOs was up 8.4 per cent, while the number of client relationship managers rose 13.7 per cent.

“After the 2009 investment-market turmoil, hiring slowed at multifamily offices but it is now rising smartly,” FWA said in the report.

This year’s MFO study also looked in detail at client reporting, which FWA highlighted is a particularly important business issue for MFOs. On this, the most significant finding was that four in ten participants said there are specific client reporting improvements they want to make but can’t.

Barriers preventing MFOs from being able to upgrade include legacy technology systems that are costly to modernize and the complexity of some enhancements like after-tax performance reporting or partnership accounting, FWA said. The study defined higher-end reporting services to include general
ledger accounting, trust accounting, partnership accounting and
financial statement generation.

Another gripe frequently cited by participants was the risk of reporting technology vendors not delivering on their promise of true consolidated reporting.

Overall, the most-offered reporting service was for tax (64 per cent), followed by partnership accounting (60 per cent), financial statement generation (54 per cent), trust accounting (44 per cent) and general ledger (38 per cent). Tax reporting was the most-used service (according to 54 per cent of clients), while trust accounting and financial statement generation were the least used (both at 41 per cent).

While various technologies claim to offer effective and cost-efficient solutions to enhance reporting capabilities, other recent findings suggest that providing “truly customized” reporting remains a challenge for many industry players, not just those in the MFO space.

Indeed, in FWA’s most recent External CIO Study, it was found that, although 83 per cent of firms serving as external CIOs for private families and family offices said reporting capabilities were “very important” to their clients, the majority of them aren’t satisfied with the quality of the client reports they provide (view more here.)

A total of 44 firms took part in the Family Wealth Alliance's MFO study, with assets under management of $293.2 billion as of year-end 2012. Mean size was $6.7 billion. Another 22 firms that the firm said are important industry players did not participate in the study but were included in the survey roster. Combined, the list comprises about a third of US MFO firms and 90 per cent of the industry's assets.