A string of recent deals and hires among multi-family offices points to rising competition in the high-end world of managing multi-generational wealth. Some firms are partnering with other firms to broaden services, while others are adding to their repertoire of in-house offerings.
- Cresset Asset Management’s acquisition in June of $2.3bn multi-family office PagnatoKarp, creating a $9.5bn firm
- Pathstone’s acquisition of Cornerstone Advisors, a $4bn shop with 600 family clients, creating a $20bn RIA and multi-family office.
- The $22bn Tiedemann Advisors, whose client base includes ultra-high net worth families, hired Cresset’s Jill Shipley to become its head of family governance and education.
- Cresset named Barbara Young, former chief executive of Cypress Wealth Advisors, to be co-head of the firm’s family office services group.
Mike Tiedemann, Chief Executive of Tiedmann Advisors, conceded that the multi-family office space is competitive but said that Tiedemann is “one of the few firms that hasn’t sold out.”
John Elmes, executive managing director of family office engagement for Pathstone, says that he expects that true multi-family office players will lead the way in the coming years as consolidation continues and firms bring more services in-house. Prior to Pathstone and his stint as president of Convergent Wealth Advisors, where he managed the firm through its sale in 2016 to Pathstone, Elmes was a founding partner of GenSpring Family Offices, where he served in multiple leadership roles.
Elmes says, “We were the first firm to put ‘family office’ in our name and after we did it, I’m pretty sure everybody in the world called themselves a family office.” “But clients are starting to see the firms that really do deliver family office services, versus the ones that are fine registered investment advisors, but not a true family office,” adds Elmes.
He said Pathstone is uniquely positioned to offer services internally, with teams dedicated to accounting, financial statements, middle-office support and risk management, among others. The firm has also built a proprietary performance reporting system. “We built the tools but also hired the people to actually deliver all the services inside Pathstone — we do not outsource,” Elmes said.
Elmes said that size and scale may be driving much of the M&A activity in the market right now. “Without size and scale, it’s hard to keep innovating, and to keep up with all the compliance issues, and to create an equity and capital structure that keeps the talent in place.” Elmes said the firm found a culturally matched partner in Cornerstone Advisors and was able to bring under its wing, and that Pathstone will continue to look for similar opportunities.
The ‘true’ multi-family office players will separate from the rest of the pack as mergers continue and firms bring more services in-house, says a Pathstone executive.
Tiedemann is doubling down on education as gaps persist between younger and older generations regarding priorities and expectations. Jill Shipley will oversee a new division focused on helping family clients educate the next generation, plan transitions and make decisions.
Tiedemann said that many of the firm’s advisors have conversations with clients far beyond estate planning, tax planning or investments.
“As they grow to be a real trusted advisor, it’s a hugely intimate seat that you’re sitting in,” he said. “The clients come to see you as a safe space or sounding board to address challenges they’re struggling with, or their family or children are struggling with their children, and not every advisor is equally well-trained, or comfortable with delivering that non-financial advice.”
Tiedemann said Shipley would help the firm bridge communication gaps and deliver on the intangible aspects of the typical family office relationship, such as educating different generations.
Improving Inter-Generational Communication
Shipley says, “Most people would describe this work as a focus on the soft stuff… it really is the hard part and often the most meaningful part of sustaining family wealth for families.”
Beyond teaching the next generation about financial literacy and establishing a strong line of communication between generations, Shipley and her team will help families establish a shared set of values and a structure for making decisions.
Shipley will also create a library of materials, including videos, presentations, tools and games that Tiedemann’s advisors can use in their work with families. Subjects includ budgeting, investing, creating an estate plan, or starting a dialogue about wealth with younger generations.
Tiedemann said that the firm’s work on impact investing, particularly with its diagnostic tool, will complement Shipley’s work. He explained that the firm now uses a tool that helps family members get a picture of what they prioritize as a family.
“It begins to define your value system or a framework of alignment that the two generations, or in some cases, three generations might share, and then the investing options thereafter,” Tiedemann says, “…it has done a terrific job of changing the conversation families are having around, for instance, a child inheriting money or what the family will choose to do with its investments.”
“The No. 1 thing is, we’re employee partner owned, so we reinvest in our business and we have a very long time horizon,” he said. “Our company was not built to be built and sold. We’re constantly evaluating parts of our firm that we think can be improved and areas that we may or may not be adequately serving our clients. That’s why we have the Zurich (Switzerland) office for our cross-border clients. The same is true with bringing on Jill and her expertise and the same is true with our impact investing capabilities.”
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