Is it a multi-family office, or isn’t it?

It is quite a paradox that after many years of writing about specialized wealth management topics for UHNWIs, we feel compelled to return to the seemingly trivial question:What is a multi-family office?”

When we were putting together the initial framework for Family Office Partners back in 2018, we were clear on a few things. First, that if I, Petr Václavínek, and my co-founder Olda Myslivec needed multi-family office wealth management for our own family assets in the Czech Republic, others would likely have the same need in the future. Logically, this led us to conclude that the years from around 2020 onwards would be the "decade of multi-family offices" in our country. In that regard, our prediction was quite accurate.

However, we had no idea that by 2024, the market would be flooded with multi-family office companies, and in our small country, we can now count them by the dozens. The situation is similar with single-family offices; today, it’s almost as if every third self-employed person has one.

Are there really tens of thousands of families and individuals in this country with assets in the high hundreds of millions of crowns? Or are these terms being misunderstood or perhaps misused for marketing purposes?

In this text, we will attempt to clarify the concept of how a multi-family office operates, based on long-established conventions from countries typically to the west of us—countries that, for historical reasons, are much, much further along in managing multigenerational wealth and have long since moved past their growing pains.

In those regions, with few exceptions, it holds true that a multi-family office:

• Works exclusively with high-net-worth individuals (UHNWIs) and only with a limited number of them.
• ‍Does not just handle the investment portion of assets, but also provides related services and expertise.
• Does not pick specific investment categories, but views assets as a whole, for which it holds overarching responsibility.
• Does not attempt to function as an investment fund that creates its own products.

We humbly add that our purpose is not to assume the role of a self-appointed authority, nor to elevate some while belittling others. We are simply trying to do our part to guide the relevant audience so they are adequately informed when choosing their wealth managers.

Are you looking for a multi-family office, a fund, or a specific service?

Working with a multi-family office is typically a long-term commitment, so investing sufficient time in due diligence is entirely appropriate.

Is a prospective partner actually looking for an overarching multi-family office, or simply for a particular investment fund, investment manager, or specialized service?

Without a deeper understanding of what each of these options provides, and what it does not, the result can easily be disappointing.

A family may end up with a product that ultimately provides little meaningful added value. Worse still, it may enter a relationship where one thing is presented but something quite different is actually delivered.

The result is fragmented responsibility. In both cases, expectations are unlikely to be met.

Let us therefore look more closely at the key characteristics of multi-family offices according to long-established conventions in more mature wealth management markets.

A multi-family office is designed for families n the hundreds of millions of Czech crowns

It may sound elitist, but there is a reason for it.

A family with assets of approximately CZK 25 million has very different wealth management needs from a family with hundreds of millions. Logically, these two families will not be operating in the same “space.” From a wealth perspective, they simply inhabit different worlds.

Someone with CZK 25 million is unlikely to be dealing with complex generational transfers. Their legal structure will probably be considerably simpler than that of a family with CZK 1 billion in assets. The same applies to tax optimization, premium medical and concierge services, second citizenships, residency planning, and so on.

At the same time, portfolio construction for someone with CZK 25 million looks very different from portfolio construction for an ultra-high-net-worth family. It is effectively impossible to apply the Endowment Model, which is widely used among UHNWIs, if only because the minimum size of individual investments can sometimes approach this amount.

By its very nature, a true multi-family office cannot work equally closely with such fundamentally different audiences at the same time. This role is better served by various specialized wealth management groups and investment funds.

The difference can also be illustrated with simple mathematics: CZK 25 million is ten times less than CZK 250 million and one hundred times less than CZK 2.5 billion. These are fundamentally different levels of wealth, which naturally result in very different requirements for comprehensive, overarching wealth management.

A multi-family office also covers many non-investment services

In other words, we should not confuse the services of a multi-family office with those of an investment fund.

The primary role of a multi-family office is typically to protect family wealth, and help it grow, as a whole across generations. It should serve as a guide in transferring that wealth from one generation to the next. An investment fund, by contrast, is primarily concerned with its own investment product, usually over a considerably shorter time horizon.

A multi-family office therefore typically needs to provide or coordinate related legal, tax, accounting, and other professional services in order to fulfill its role.

In addition, it should provide a range of softer capabilities related to generational wealth management. This is not simply about traditional investing. Far more important is the approach to the multi-family office concept as a whole and the discipline to follow a long-term plan, not merely an investment plan.

It is about:

• Understanding wealth as one interconnected whole, rather than merely as a collection of individual asset classes.
• Avoiding fragmentation of the portfolio across managers or family members who do not collaborate with one another.
• Consolidating investment information under one roof and creating an objective view across the entire portfolio.
• Overarching responsibility.
• Understanding the related legal and tax implications and ensuring that information is interconnected.
• Trying to filter out mistakes that can be avoided through more thorough oversight.
• Emphasizing genuine diversification, a very long investment horizon, and the continuity of the family beyond purely financial considerations.
• Having a Plan B in the form of alternative residencies or second citizenships. These areas are also often part of the expertise of multi-family offices.
• The same applies to connecting families with specialists in premium healthcare, philanthropy, legal protection, or privacy.‍

Some of these services may be provided internally, while others are coordinated through trusted external partners. These partners typically focus primarily on the UHNWI segment and therefore understand its specific needs better than providers serving less affluent clients.

As a general rule, however, a multi-family office will first look within its own trusted ecosystem before turning to external providers.

After all, a multi-family office typically has an extensive network of relevant contacts serving the UHNWI community. This network grows organically as new families and individuals join. With each new relationship, the collective knowledge, contacts, and valuable experience of the ecosystem expand.

One of the benefits of being part of a multi-family office is precisely this privileged access to trusted specialists and to the experience of other like-minded families and individuals.

A multi-family office looks at the entire family wealth, not just one part of it

A multi-family office does not choose which parts of a family’s wealth to manage or oversee and which to ignore. Nor can it logically compete for performance against other parts of the portfolio. Like a single-family office, a true multi-family office must view family wealth holistically and objectively, from the top down.

f a would-be multi-family office focuses only on one part of the portfolio, it is probably closer to a specialized wealth manager or an investment fund.

Again, the point is not to suggest that one is better than the other. It is simply important to understand what you are actually looking for and which type of partner is capable of providing it over the long term.

Ultimately, someone has to take a critical look at the entire portfolio. That role may be performed by a more or less qualified family member or, in the case of the wealthiest families, by a dedicated team within their own single-family office. Alternatively, it can be entrusted to a partner team within a multi-family office.

A multi-family office is neither an investment fund nor a partial service provider

Like anyone managing assets on behalf of others, a multi-family office should have a very strong fiduciary duty, meaning that it should act in the best interests of the investor and the family.

Among other things, this means avoiding conflicts of interest wherever possible. A conflict of interest may arise when one investment is favored over another at the expense of invested capital, or when services are deliberately layered in ways that increase total costs beyond what can reasonably be justified by the expected return.

It is one thing to establish proprietary SPVs that pool capital from individual investors in order to reduce fees or reach the minimum investment size required for a particular opportunity. This is common practice among multi-family offices and can sometimes even be necessary.

It is quite another thing, however, to create proprietary vehicles and funds that compete with other, often better and cheaper, products available elsewhere.

Does an organization doing this still follow the conventions of a multi-family office, or are we now talking about an investment fund?

And what if such an organization creates its own products specifically to generate an additional stream of fees for itself? At that point, fiduciary duty can be seriously compromised, raising the obvious question: Cui bono?

Beware of conflicts of interest. They are simply another hidden cost that someone ultimately has to pay.‍

Selecting a multi-family office partner deserves proper due diligence

This is not the only article available on this topic in Czech, nor are we trying to draw rigid black-and-white boundaries. Managing significant family wealth can be complex, and there are legitimate counterarguments to many of the practices discussed above.

Nevertheless, we encourage the relevant audience to take the time to study the available information so they can better navigate the newly emerging Czech multi-family office landscape.

A multi-family office is not simply about investing money. On the contrary, it is a complex ecosystem whose methodology, philosophy, and lifestyle extend far beyond the services traditionally provided by investment funds and investment advisers. It is therefore essential to define your specific objectives and expectations clearly and choose a long-term partner accordingly.‍