Family offices have grown in popularity in recent years as company founders and independent financial professionals have turned to the structure as a way to manage wealth. And as these offices grow and adapt their management style and investing strategies, big banks are restructuring their services to stand out in the heated competition to attract these leaner and more complex family offices.

In April, Morgan Stanley announced updates to its family-office unit that include a new platform which allows startups to tap capital directly from family offices. The unit has added more than $25 billion of assets to the platform so far.

JP Morgan also has a new Miami unit aimed at attracting family offices in Latin America as well as the U.S. Advisers will be able to help with cross-border transactions in addition to wealth management.

“Family offices are dealing with a complex set of issues,” said Dave Fox, president of global family and private investment office services at Northern Trust. “Established multigenerational family offices have a unique issue, in that they have to continually assert their value proposition to keep younger family members in the fold. Newer family offices often don’t have that problem, but they are managing investments in a different type of environment than we have dealt with over the past 10 years.

“Both types of family offices really have to spend time right now deciding what their goals are and what they want to in-source and what they want to outsource.”

To respond to both of these concerns, Fox said, Northern Trust offers front-, middle- and back-office support that gives families options once they have decided how they want to break up responsibilities. It also allows them to change course as the needs of the family office change.

Firms such as Northern Trust have the advantage of size as well as access to institutional deal flow that is harder to find at smaller banks or boutique firms. Big banks promote this as well as their ability to manage international transactions. Both of these capabilities can curry favor with the growing number of family offices that are global in nature, either through their operating companies or investments. Family-office units within these firms typically operate as mini-boutiques, providing customized service backed by the largesse of the firm.

Goldman Sachs developed a similar solution in 2018 with OneGS. The platform includes the full scope of investment management alongside a consulting practice that supports a range of issues including M&A, multigenerational offices and philanthropy. The family office group operates almost as a boutique firm within Goldman Sachs, dedicated to family-office management but with the broader capabilities of the firm as an investment bank, said Sara Naison-Tarajano, a partner and global head of private wealth management capital markets at Goldman Sachs.

The model has gained traction with families — especially as many think through changes to strategic asset allocations during the ongoing market volatility.

“M&A activity is slowing, valuations have come in, but it hasn’t stopped,” Naison-Tarajano said. “But we have seen more movement into other asset classes. Private credit is becoming more popular with families.

“Family offices, broadly, have been under allocated, but we are seeing that change. There’s a unique opportunity for families that move into this asset class now because they have longer timelines. And many of them have operating expertise, so they understand what businesses are facing right now.”

The total-office model is also popular with organizations that are transitioning from being centered on an operating company and moving into a family office that is focused on wealth management, whether single- or multigenerational. U.S. Bank offers a suite of turnkey services through its Ascent Private Capital Management family-office unit.

"We’re seeing an acceleration of interest in exploring exits from businesses," said John Zimmerman, president of Ascent Private Capital Management. “Families are also talking to us more about complex lending against the collateral that they have and how to use debt strategically. …

“There is also a bigger focus on impact. So it’s less of the passive foundations that would donate when someone passed on and more of a focus on ‘What can we do now to make a significant impact?’ ”

THE LOCAL GUYS
Units like Ascent also have the advantage of feeling more local. U.S. Bank’s primary footprint is in the Midwest and western United States, and the bank has local name recognition as well as connections with local philanthropies. That can be a differentiator for families who are skeptical about finding high-touch services and support at a giant nationwide investment bank.

Firms such as Plante Moran and Legacy Trust have also been able to stand out in this way. Both firms have reach into large financial centers like New York and Chicago, but their core footprint is well outside of Wall Street. To some clients, the focus at both firms feels less like an investment bank and more like a consultancy. Wealth management is a component of the offering, but families can also work with these firms on lifestyle management and other aspects of running the family office.

Jack Kristan, leader of the family-office practice at Plante Moran, said he has been working with families on efforts to modernize and rely on new technologies. “There has really been a significant uptick in client requests to modernize and improve technology over the past 18 months,” Kristan said. “We have been working with families to understand what the needs are and how we can provide that expertise or help recruit for internal roles.”

Top-of-mind are cybersecurity issues, Kristan said. But families are also looking for ways to use technology to make operations more efficient and improve the user experience for family members — no one wants to get a pile of papers delivered quarterly.

There is a growing expectation that the family office will function in online and mobile environments like most other services. However, that may require more of a heavy lift to achieve if a family office hasn’t been significantly focused on technology.

Being able to provide services like this can be a differentiator as more families look to streamline their external relationships in an effort to keep things simple and lower costs.

“There is more of a focus on what you can offer through your platform in terms of a range of services and capabilities,” said Brian Formento, head of client solutions and investment strategies at UBS Private Wealth Management. Families are looking closely at their relationships, Formento said. If a firm wants to make the cut, it has to be able to provide value beyond basic investment and consulting functions.

GOING GLOBAL
Alongside consulting and modernization, families — especially those with emerging younger generations — are looking for firms that can help them get into new areas such as private credit or impact investing. Family offices are more often becoming nontraditional financial sponsors, which adds a layer of complexity to any wealth management or investing plan.

“Many operating companies have a global presence today, and so we have more families with a global orientation from the beginning. This carries over into their investments and philanthropy,” said Judy Spalthoff, head of family-office solutions at
UBS. “Sometimes there’s a sense, especially from rising generations, that they don’t want to work with their father’s firm. But we have a global presence, … and we also have a global perspective [that] is valuable.”

UBS recently updated its family-office unit to support these efforts. That global perspective extends into areas such as impact investing or philanthropy, Spalthoff said. Those global connections can manifest themselves in other ways. UBS, for example, has organized events and trips for its family-office clients abroad that are designed to build connections. Goldman Sachs has also organized events for rising generations to network with each other and learn more about impact investing.

Because family offices aren’t bound to fund life cycles and may already be doing business in other jurisdictions, said Goldman Sachs’ Naison-Tarajano, they are positioned to be an important part of the global market structure — whether that is as a nontraditional sponsor or impact investor.

“These are organizations that can be really positive partners because they are OK with having less control, and they add a lot of value on the operating side,” she said. “We’re seeing a lot of deals getting done with families investing alongside growth equity firms and other sponsors — that just wasn’t happening 10 years ago. I think it’s only going to increase.”