Recent data shows that Canadians are on average better off than their counterparts south of the border, which should bode well for the family office industry. And one newbie business in Toronto, set up late last October, hopes to make an impact.

Recent data shows that Canadians are on average better off than their counterparts south of the border, which should bode well for the family office industry. And one newbie business in Toronto, set up late last October, hopes to make an impact.

Equilibrium Partners, a multi-family office set up by Mark Rotstein, already caters to 20 families less than a year into its existence. Rotstein told this publication in a recent interview that he can reach 50 families in total, although by that stage he’d need to revisit his business model.

“I have, I think, found a niche in that I looked at how people ran a businesses and surrounded themselves with trusted advisors. Then the business gets sold. Very few people structure their personal affairs in the way they did with their business affairs,” he said. “I am trying to be a trusted advisor to individuals and families; I am not selling them anything,” Rotstein said.

“At present, I am the only partner employed by the company.  However, we have very close associations with investments advisors, portfolio managers, insurance advisors, estates professionals and accountants,” he continued.

“A lot of my peers use the word 'family office' and yet really what they are money management firms,” he continued. “There is a significant conflict if you want to be a trusted advisor and yet sitting behind you is a person managing money and charging so many basis points for it,” he said, adding that he obtains his clients through a mixture of referrals and word-of-mouth.

Canada is in good shape to provide a breeding ground for family offices. A recent survey by the WealthScapes 2013 financial database showed that the average Canadian household is richer than its US equivalents (although any average figure will contain a considerable variation from one side to the other). Canada has – with some exceptions – come out of the 2008 financial crisis in better shape: none of its major banks experienced the kind of wrenching losses seen south of the border. (Not that should be any reason for complacency).

The number of high net worth individuals in Canada – or people with investable wealth of $1-million or more – rose 6.5 per cent to a record 298,000 people last year. Among ultra-high net worth individuals - those with $30-million or more – the population grew by 11 per cent to 4,500 people last year (Source: RBC Wealth Management/Capgemini).

Among some other Canada-based multi-family offices are Northwood Family Office, which caters to families which typically have at least $10 million in investable assets, according to its website; The WaterStreet Group is another, as is First Affiliated.  

There is certainly plenty for such businesses to do. Late last year, a survey by Nicola Wealth Management found that around 90 per cent of businesses in Canada are family-operated, and yet many families lack a succession strategy. Succession is precisely the sort of issue that family offices were designed to help manage.

Making the case

Even so, no matter how much wealth there is around and in need of protection, the key is persuading individuals to take the plunge into a family office business model, particularly as this is an unfamiliar term to many people.

“The main challenge I see at present is displaying to families we work with where the real value is in our services.  Our fees are transparent,” Rotstein said. “Many are not used to paying fees for service. This is a challenge and a risk.  However, as my relationship deepens with clients, the value added becomes quite apparent,” he said.

At the moment, Rotstein says he outsources most of the work of the business and acts mainly as a “quarterback” to co-ordinate what other professional advisors do for his clients.

The Canada multi-family office sector may, as Rotstein says, resemble a young toddler when compared to the US, but if firms such as Equilibrium continue to grow at the sort of pace he’s been able to chalk up, its profile is likely to increase pretty soon.