Multifamily office executives expect their business to grow more than 30 per cent in 2010, according to Janelle Sallenave, vice president, client experience and head of Family Office Business at Schwab Advisory Services.

“We surveyed the principals that we work with, and they estimate growing more than 30 per cent through new business,” Ms Sallenave said in an exclusive interview with Family Wealth Report on Thursday. “They say there are a significant number of prospects in the pipeline right now.”

To cultivate and sign up those prospective clients, MFOs are beginning to hire more sales people, according to Ms Sallenave.

“They’re making a strategic investment in the business,” she said. “They’re hiring a dedicated sales person for business development of prospects, as opposed to someone working with existing clients.”

MFO growth is also expected to come from single-family offices joining existing multifamily offices, industry analysts say.

Over half of single family offices surveyed by the Family Wealth Alliance earlier this year said they expect to make substantial changes in the future, including partnering with MFOs.

Pricing models for multifamily families are also evolving, Ms Sallenave said.

“We’re in the midst of a transition to a spectrum of pricing models,” she said. “The traditional standard has been a percentage of assets under management and or a fee. But now we’re seeing hybrid models and alternatives.”

MFOs are increasingly concerned about being compensated for the additional work they do for clients, usually in the form of family governance, lifestyle and education services, as a family’s wealth and family grow.

Some MFO executives refer to the phenomenon as “work creep.”

One increasingly popular pricing solution, Ms Sallenave said, is a “refilling retainer,” where a family estimates the amount of extra work it may need, pays for it in advance, and the account is drawn down as the work progresses, and refilled if necessary.

One analogy, she said, would be a pre-paid phone card that pays for a set number of minutes, and is then renewed.

Such innovative pricing models are critical for the future of the MFO business, Ms. Sallenave said, because the plethora of services an MFO provides has kept profit margins tight.

“The needs of wealthy families will evolve,” she noted. “A client who is an executive at Google and signed on ten years ago today is wealthier and may have a bigger family. Their needs are going to be more complex, but the pricing model hasn’t changed.”

“Managing growth in ways that retain profitability so that multifamily offices can continue to reinvest in people and the business will be their biggest challenge in 2010,” Ms Sallenave said.

To assist MFOs that custody with Schwab, the Schwab Family Office Business, now two years old, is focusing on working with firms on issues surrounding talent, such as job descriptions, best practices for interviewing candidates and compensation benchmarking.

Other priorities for Schwab next year include operational enhancements for MFOs, including account cloning capabilities and streamlining standing letters of authorization from MFO clients.

In addition, Ms Sallenave said, Schwab is inviting multi-family office executives to a series of roundtables with industry experts.

The most recent roundtable was held in New York this week.