Family offices and multi-family offices are increasingly likely to be international businesses in character, while their rising complexity is raising new risks, wealth industry figures say.

As demands placed on family offices and MFOs rise, risks such as indemnity against loss or other problems are multiplying, Charles Hamilton Stubber, managing director, Aon Risk Management, Europe, told the Wealth Management and Family Office Summit in London.

The losses in financial markets, rising litigation and regulatory burdens are highlighting the increasing dangers to which family offices and MFOs may be exposed, Mr Hamilton Stubber said.

“Professional liability exposures are coming up high on the list of the kind of risks that we should be looking at,” he said. To give one illustrative example, he said the cost indemnity insurance premiums on property conveyancing work have doubled over the past year.

The $65 billion Bernard Madoff Ponzi scheme fraud, for example, snared people and institutions including family offices, such as those of the Loeb, Wilpon and Thyssen dynasties. In the case of the Wilpon family, its large losses put the family’s ownership of the New York Mets baseball team under threat.

Wealthy families are already faced with specific risks, such as media invasion of privacy, kidnappings, piracy, personal safety and business continuity in the event of disaster. Such risks can spring from the most unexpected quarters: Mr Hamilton Stubber mentioned the example of an institution that filed a big insurance claim to repair losses sustained due to disruption of business caused by a recent Group of Seven summit of world leaders.

Insurers such as Hiscox, for example, write policies to mitigate the risk of events such as kidnappings, although as Mr Hamilton Stubber explained, some risks require careful evaluation. “Planning is the best form of insurance,” he said.

The conference heard that the family office and MFO sector is not just facing new risks, but is also becoming more international in flavour.

“There is certainly demand for it [cross-border family offices]. The question is who will provide it,” Michael Maslinski, the founder of his eponymous consultancy firm, told the conference.

His views chime with opinions of industry figures who last year told WealthBriefing that they expect multi-family offices to become large institutions across national borders.

There is already evidence that multi-family offices can be large and operate cross-border beyond their home turf. There is the case of Fleming Family & Partners, the institution set up to manage the wealth of the Fleming dynasty after Robert Fleming was sold to US bank Chase Manhattan in August 2000. FF&P is not just a UK player: it opened offices in Hong Kong two years ago and also has offices in centres including Zurich, Singapore and Vaduz.

“The single family office sector has always been international in nature. Families determine the location of their offices based on regulatory regimes, ease of access, closeness to family members, attraction of the location and closeness to other support functions. The MFO space is becoming more international, MFOs are looking at how they can develop their brand cross border/cross region,” Paul Pratt, managing parter, international, of the Family Office Exchange, a group representing the sector, later told WealthBriefing.

"The main reason for any MFO [multi-family office] to broaden its reach is to offer a localized service to current families, attract more families, to build local skills/knowledge/local partners and to develop economies of scale. They still face the same hurdles as before however as more MFOs are being established there is more interest in cross border partnership and co-operation between MFOs," he said.

Some of these institutions have a very wide footprint. The Guggenheim Family Office, part of Guggenheim Partners, a product of the Guggenheim dynasty in the US, has offices around the world, including London, Hong Kong, Dublin, Geneva, Los Angeles and New York.

Last year, Sand Aire, the UK-based MFO, told this publication that getting cross-border development to work is hard, given cultural, linguistic and other factors.