Registered investment advisors are constantly exploring new ways of gaining a competitive advantage in the increasingly crowded wealth management market. In an industry that seems to be evolving by the day, our investment banking team at Dynasty often asks each other, “What do you think will happen next? What is the next frontier of RIA M&A?”

One answer we keep coming back to recently involves the play between RIAs and family offices/multi-family offices . 

With the number of ultra-high net worth families continuing to rise, many RIAs are exploring how to enter this lucrative sector. The key decision they are facing is whether to become a true multi-family office by building an offering from scratch, or to source a partner who can add multi-family office services to their business. Each route has its pros and cons, and the industry has seen its fair share of hits and misses in executing both.

Going organic
On the one hand, some firms are developing multi-family office capabilities organically, or bringing in third-party providers to deliver authentic family office capabilities. Third-party providers design all-encompassing MFO offerings, freeing up time for the RIA to continue serving its clients and not worry about hiring, sourcing new tech, etc. For example, Helium Advisors, an RIA based in Washington, integrated Rise Family Office, a California-based multi-family office to add wealth and tax expertise to its service offerings for clients. A downside to the organic approach is cost – the expense of servicing the full range of ultra-high net worth client needs can impact a RIA’s profitability. Also, the range of service and needs vary by family, so RIAs cannot rely on one-size-fits-all work processes when working with ultra-high net worth clients.

Inorganic/M&A approach
The second point of entry for RIAs into the multi-family office space is via merger with an existing multi-family office or with a family office-style RIA. Many family offices are incorporating traditional RIA offerings into their suite of services, and many RIAs are expanding their offerings to include services traditionally reserved for UHNW clients. 

This has increased overlap and collaboration between family offices and RIAs to provide a more holistic approach to wealth management at the highest wealth and income levels. By combining investment management, financial planning, tax and estate planning, and family governance, family offices and RIAs can create a cohesive offering that meets the unique needs of UHNW families. Together, their deep understanding of a family's goals and values can inform their investment and planning strategies, centralizing the management and coordination, as well.

Pathstone is a great example of this. They are one of the most M&A-active multi-family offices. They recently acquired Crestone Capital, a Colorado-based RIA with $3 billion under management that specializes in advising the ultra-wealthy. With the addition of Crestone, Pathstone’s ultra-high net worth business will increase to 600 clients with an average net worth of roughly $100 million. 

The RIA industry has developed to the point that there are firms large enough to attract outside investors like family offices, and, as MFOs become more popular, their services often overlap with those of RIAs. We continue to monitor this growing trend and look forward to helping RIAs and MFOs collaborate to offer clients the next-level service they are looking for in today’s market.