Multi Family Offices Outperforming Financial Peers

Top Multi-Family Offices and Wealth Advisor Firms are Breaking Away from the Pack.

A new study from Family Office Exchange LLC (FOX), a global membership organization of enterprise families and their key advisors, has revealed growing profitability among multi-family offices and wealth advisors and, at the same time, increasing divergence in profit margins and revenue growth.

These findings come from the 2014 FOX Multi-Family Office and Wealth Advisor Benchmarking Study Report, FOX’s best and most current thinking on the direction of the Ultra High Net Worth (UHNW) advisory business.

Overall, profit margins are growing at multi-family offices and wealth advisor firms, with median profit margins up by 5 percentage points (from 19% in 2012 to 24% in 2013), but a few top firms are substantially outperforming their competition. Top quartile firms are now outperforming bottom quartile firms in profits by 3-to-1 (33% vs. 11% profit margins), up from a rate of just over 2-to-1 the year before (29% vs. 13%). This increase in profitability is due to both growing revenues and well-managed costs.

Revenue was up 20% year-to-year at top quartile firms—compared to 6% at bottom quartile firms signaling both strong growth and increasing divergence between the top and bottom quartile performers.

Firms experiencing positive operating leverage have improved cost controls, deployed new technology to their front lines, and experienced cost savings due to lack of available talent to fill advisory roles.

“There is a subset of firms in the wealth advisor market right now that are effectively executing strategies leading to exceptional growth,” says David Toth, Director of Advisor Research for FOX. “Many larger firms have programmatically bolstered growth by substantially increasing referrals from other lines of business within their organization.

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