NEWS AND INSIGHTS FROM FINTRX
Like any vertical dealing with the ultra-wealthy, every family office is unique in set-up and structure, with each requiring a different combination of services depending on the wants and needs of their clientele. This makes defining the murky world of family offices incredibly challenging. To shine a light on the global wealth ecosystem, we provide extensive insight into the history and evolution of these private wealth entities.
The true definition of a family office is a group that provides a family or multiple families with a multitude of personal and wealth management services. Like any vertical dealing with the ultra-wealthy, every family office is unique in set-up and structure, with each requiring a different combination of services. Over the past few decades, family offices have rapidly evolved, ultimately reforming how high-net-worth families and individuals manage capital. While this evolution continues to add value across the board, this unique maturation has also added complexities to an already obscure space.
Family offices are a unique breed. When it comes to putting capital to work, these private wealth vehicles are incredibly opportunistic and nimble. In comparison, their institutional counterparts often have specific investment mandates and benchmarks needed prior to pulling the trigger on an investment. The average institutional investors (labor unions, banks, insurance companies, pensions, etc.) require longer and more protracted due diligence cycles as opposed to family offices, which have significantly greater thresholds for longer investment hold times. This difference makes family office investors an incredibly attractive pool of capital for both funds and private deals alike. We will unpack further when exploring the increased direct investment trend in the family office landscape, as both play a vital role in the AUM makeup of an array of investment opportunities.
Family offices are split into two core buckets: single-family offices (SFO) and multi-family offices (MFO). In a general sense, single-family offices are private groups that manage the financial and personal affairs of one high-net-worth family or individual. A well-structured single-family office will oversee a myriad of additional items such as insurance needs, tax planning, fiduciary responsibilities, trusts, aviation, real estate holdings, etc. Typically the minimum amount of assets needed to create a financially focused single-family office is $50 million or greater.
Multi-family offices are private organizations comprising qualified and well-respected professionals with extensive experience in providing a range of wealth management services to many unrelated high-net-worth families and individuals. Much of the core multi-family office structure is already in place for new families to leverage and plug into, so we often see these wealth vehicles market their services to new affluent families as they seek to attract more clients. In fact, you will often find many family offices that started as single-family offices, and over time, morphed into multi-family offices.
For more on the unique distinctions between single and multi-family offices, click below.
When the term family office arises, I bet it doesn't evoke the ideas of stewards and their kings. In accordance with the EY Family Office Guide, the concept of private wealth management first emerged in the sixth century, when a king's appointed steward was held responsible for managing royal wealth, establishing the concept of stewardship that is among us today.
How we categorize family offices today took shape in the late 19th century with the founding of the House of Morgan in 1838. In 1882, the Rockefeller's - an American industrial, political, and banking family that owns one of the world's largest fortunes - founded their own family office, which is still in business to this day. This development brought forth the rapid expansion of family offices - first emerging in the United States and then moving elsewhere around the globe.
Today's family offices are far more sophisticated and forward-facing than ever before, as they can no longer afford to be inconspicuous. The single and multi-family office world is rapidly becoming an important source of capital for private companies, either as a funding source or in a complementary partnership with other private wealth investors, venture capitalists, and institutional capital providers. The modern family office of today seeks to put capital to work and find deal flow - often in more nascent and emerging industries, such as cannabis or blockchain. Until now, you would rarely uncover full public dossiers of information. The previous family office model was meant to preserve the wealth for future generations, whereas the present-day model is increasingly about putting money to work in the wealth owner’s lifetime.
Technological advances and progressive growth in the family office space make finding commonalities significantly easier. Comprehensive family office data platforms such as FINTRX make it possible to discover unique similarities that drive stronger outreach processes. You can do this manually within your own network or leverage our one-stop solution with an offering like FINTRX Affinity. Designed with AI to humanize your outreach, FINTRX Affinity delivers custom conversation starters, actionable insights on your best path to connect, and meaningful intel on your shared commonalities across 10,900+ family office decision-makers. Using our savvy algorithms, FINTRX auto-updates your Affinity Score every night at midnight, generating the most optimal matches for your outreach purposes daily.
Regardless of your profession, level of experience, or the industry in which you work, networking events provide invaluable opportunities to enhance your career and personal growth. Given the traditional furtive nature of the private wealth environment, it makes attending events even more valuable to the asset-raising professional.
Conferences boast an interactive engagement model that allows for productive networking opportunities and meaningful discussions with those in the private wealth space. Once you decide to attend, your success relies on having a plan before, during, and after the event. Being prepared and proactive helps to ensure new connections that last - and remember, the mindset you choose prior to the event affects your performance and overall results.
Family offices, specifically single-family offices, are much more likely to allocate capital to industries for which they made their wealth. This seems natural enough. If you can understand 'it', you are far more likely to peel off capital. This can be increasingly valuable for funds and private companies seeking seed investors. If you can target capital that can wrap their arms around your proposition and truly understand what you're doing, your hit rate will rise.
Family offices are opportunistic by nature. You will not find specific mandates in the family office world. Their goal is to compound capital and find unique opportunities to put money to work. The result is increased opportunity for those seeking capital. The modern family office is often less concerned with track record length, assets under management thresholds, etc. Due diligence is of course comprehensive - as it should be - but the amount of red tape is substantially less than you would find in large institutional markets.
You will also find an increasing trend in family offices, making direct investments into private companies and deals. The reasons for this are having more control, fewer fees, and their ability to provide patient capital. There is great value here for the family office and the funded entity. This macro direct investing trend continues to gain steam and does not appear to be stopping soon.
Direct investments have become increasingly common throughout the family office space, particularly within the single-family office ecosystem. We attribute this trend to several changes, none more influential than the increase in sophistication of family office vehicles themselves. Over the past decade, family offices have accumulated the assets and talent required to allocate capital directly into the private space. The result is more than half of family offices allocating capital directly to some degree. FINTRX offers an innovative framework to provide users the ability to query a macro-level view of the private capital markets and track where family office and investment advisor capital is flowing.
What was once a niche industry focused mainly on the United States has now gone global. An increase in private wealth has continued to expand the creation of new family offices in areas that were essentially void of family offices in the past. Asia, for example, has seen a rising number of family offices over the past few years, with many predicted to be on the horizon in the coming years as generational wealth continues to change hands.
Assets under management (AUM) is the total value of all the assets managed by a family office. In a single-family office, this applies to an individual or one family. Multi-family offices allocate capital for several high-net-worth families or individuals. The true minimum AUM threshold to be considered a family office is cloudy, as it depends ultimately on the office itself. FINTRX uses $50M, however, a majority fall above $100M.
Impact investing has experienced immense growth in the last decade, outperforming the benchmark for eight out of the last 10 years, according to the MSCI ESG Leaders Index. To address social and environmental issues around the world, impact investors aid mission-driven companies, whose innovations spur change and speed up economic growth for the coming generations. In utilizing the FINTRX platform, which covers hundreds of families active in ESG/impact investments, we have shared five family offices making impact investments in an array of industries and asset classes.
ESG and impact investors make investments in companies, organizations, or funds intending to generate valuable social or environmental impact alongside a financial return. Investing with high standards to maximize financial performance and public benefit, impact investors aim for a financial return while also making a positive impact on the communities in which we live. These investments are immensely attractive to the family office ecosystem as they put forth the agenda of investing responsibly, besides producing a strong ROI.
The family office landscape is a forever-moving target, though its continued expansion and growth remain steady. The allure and genuine interest in family office capital is here to stay, as the benefits of securing an allocation from family office capital pools are vast. We advise you to take a thorough analysis of this highly sought-after and often misunderstood space. FINTRX is always eager to chat with capital-raising professionals keen on tackling the family office market. With the right tools and strategies, we strongly believe there are many opportunities within the alternative wealth space.
FINTRX is a leading family office & registered investment advisor (RIA) data intelligence solution that provides comprehensive and reliable data on 3,700+ family offices, 20,000 family office contacts, 40,000 RIAs and 850,000 registered reps. Our platform combines data, analytics and intuitive software to help clients identify potential investment opportunities, connect with investors and clients and stay informed on industry trends and developments.
FINTRX sources data from both public and private sources and has a team of 70+ researchers who map, validate and compile data daily to ensure its accuracy. The FINTRX platform offers a modern and intuitive interface and numerous analysis tools, charts and graphs. It also provides daily updates to ensure users have access to the most current and accurate data.
For an in-depth exploration of the FINTRX family office platform, request a demo below.