Family Wealth Report recently spoke to Market Street about why it believes its unique client ownership model resonates so well with wealthy families.
Market Street Trust Company is a family office and New York private trust company that provides wealth management services for around 40 client families, including multiple generations of its Houghton founding family, as well as nine private foundations.
Operating as a single family office until 1997, the Houghton family – founders of what is now Corning, Incorporated – evolved into its sixth generation and started thinking about what shape its future growth path may look like.
“As we thought about sustainability and how to ensure that we could attract and retain talent, the family decided to grow the business via a mutual company model,” the firm's president Marianne Young told Family Wealth Report.
Young explained that Market Street has a unique structure – that of a “shared” family office, where client families actually own the firm. For that ownership stake, they make a small capital (~30 bps) investment upon joining. Profits are reinvested in the firm, which Market Street sees as a strong alignment of interests between staff and clients – and believes is therefore a unique selling point. It also enables Market Street to keep its fees lower than what is normal for the industry, she said.
“This is all aimed at being as client-centric as one can be,” said Rob Elliott, vice chairman at the firm. Clients also may have seats on the board, where they can help guide the firm's strategy. Each client family becomes a member of Market Street Partners, which meets annually to review the state of the trust company.
Elliott added that in “commercial” multi-family offices, while client service may be high-level, fees and growth are often the focus of the firm. At Market Street, the client’s interest is the first and most important filter the firm has in making decisions on key issues. “For example, we do not incentivize our team for securing new business...,” Elliott said.
Similar ownership structures within the multi-family office
universe are rare, according to Elliott. Most families that seek
to bring in outside families still want to maintain sole family
control over the firm. The Houghtons, now into their seventh and
eighth generations, decided that Market Street would be a more
attractive place for new families if they were made partners in
the firm’s success, he said.
“There are some family offices that really are just run by and for one family,” he explained. “The Houghton family realized that having other people on the board with business and investment experience could be helpful to making sure they're engaging in best practices. They understood that sustainability of the firm and finding the right families to partner with was more important than maintaining full control. That unique thinking created a structure that’s difficult to duplicate.”
One thing Market Street has recently added to its capabilities off the back of this form of client engagement is account aggregation and reporting, for which it now uses Private Client Resources. This means the firm can now take on clients that have assets away from Market Street and include these in their overall asset allocation picture.
“That was something some of our newer clients were interested in us being able to do,” Elliott said. Another example of a strategic idea that Market Street's clients helped develop was the 2014 launch of an office in New York City, which Elliott heads up (the firm remains headquartered in Corning, NY, also the home of Corning, the specialty glass and materials company the Houghton family founded almost 165 years ago).
“Because we work with multi-generational families, often the
younger family members have different communication preferences,”
Young said. “So in addition to the aggregated reporting
capabilities, we created live, secure client portals that allow
us to store and deliver information to clients in an efficient
and collaborative way. We expect both our younger and older
generations will use it.”
Elliott explained that Market Street has some clients that aren't as business-oriented and entrepreneurial as others but like the idea of this “shared” model because they understand the issue of alignment of interests.
“While they may have no interest in being on the board, they are happy to know that they have a vote on electing the board and understanding how the business is being operated,” he said, noting that a recent board-level discussion point has been around how the firm should grow, and at what pace.
“One opportunity for growth I see is in working with single family offices that are perhaps under-sized and under-resourced and thinking about their future and service requirements,” Elliott said. “Some are very interested in our model because we still have the DNA of a single family office but provide an interesting alternative to them versus going to a commercial multi-family office/big bank or wirehouse. So for us I think there's an opportunity to take on some of these families in the $100-$300 million range that are somewhat under-resourced.”