Spanish multi-family offices have taken time to make inroads into the wealth management arena but the sector is hotting up with a number of new business ventures.

There have been recent moves in the market for multi-family offices in Spain, as firms seek to exploit the wealthy families’ perceived appetite for advice to help them avoid problems faced by their investments during the financial turbulence.

There has been a flurry of corporate moves and recruitment drives by some firms as it appears the market in Spain is now ripe for a push by multi-family offices. Against this background, one of the most striking developments has been the merger of MdF Family Partners and Achievers Family Office, both based in Madrid.

The resulting company, MdF Achievers, brings together former executives of the private banking department of JP Morgan in Spain, while one of the partners, Daniel de Fernando, was the head of private banking at BBVA, Spain's second largest bank, until last year, when he left to set up MdF Family Partners.

In April, the Bank of Spain logged the registration of Attitude Asesores, another Madrid-based firm, created by two former executives at Caja Madrid, the country's second largest savings bank. They are Juan Fernández Jaquotot, who was a deputy director of portfolio management, and Carlos Barceló Mendiguchía, who was the head of fixed income at the bank. A third partner, Diego Megía Zunzarren, was the manager of the Elcano Relative Value hedge fund, which belongs to Proxima Alfa, the asset management firm owned by BBVA.

Other firms have nabbed top officials from rivals to boost their teams in what they see as a market with huge growth potential, but without a huge source of labour to dig in. Tressis, a wealth management firm, hired Juan Jesús Gómez and Santiago Mingolos, the two top family office executives at Arcano Investment Advisors. They have been given the mission to kick-start Tressis' business in the family office segment.

Arcano also tapped a rival to fill the void caused by the departures: the new head of the family office operation is Iñigo Susaeta, who previously was the general director of Nmás1 Patrimonios, the private banking department of independent financial group Nmás1. He brought along one of his closest associates in the previous employer too.

Waiting for lift-off

Although family-owned companies are a feature of the Spanish economy, the family office market has not taken off for good in the country so far. A number of reasons have been highlighted by family office executives consulted by WealthBriefing to explain why the market has been underdeveloped thus far.

One of the main reasons, as pointed out by Javier Muguiro, one of the partners at MdF Achievers, is that Spaniards have never been comfortable with paying for investment advice. Borja Durán, the CEO of Family Office Solutions, one of the oldest multi-family offices in activity in the country, says Spanish clients have often thought that managing their investments was "easier than it really was”.

Mr Susaeta links this characteristic of wealthy clients with cultural tracts that are typical of his compatriots. "When we are sick, we don't go the doctor, we go to the drugstore and buy the medicine ourselves," he said. "At most, we ask the opinion of the pharmacist. But sometimes the pharmacist may feel tempted to sell you the product that is better for his business, not for the patient."  In investment terms, the drugstores are the big banks that control the Spanish financial market and who also have a dominant position in the management of financial assets owned by wealthy families.

Some of them, like Banco Santander and its private banking subsidiary, Banif, saw their reputations suffer from exposure of clients to structured products linked to Lehman Brothers, as well as exposure to the Bernard Madoff scam. "After what has happened in the past two years, we think wealthy families are now ready to talk to the doctors, i.e., the multi-family offices," Mr Susaeta said.

Both companies stress that their most important competitive asset compared to the big banks is the autonomy with which they can chose the best investments to the particular needs of each family.

MdF Achievers is not linked to any financial institution, only to a couple of single family offices that provide them some extra expertise. Arcano’s Mr Susaeta says Arcano has procedures in place to guarantee that products from other parts of the group, notably its private equity funds, are presented to clients the same way as any other product. Anyway, he says, clients tend to be more concerned about conflicts of interest now than in previous years.

Spanish family offices usually aim at families with over €15 to €25 million of investable assets. They have reasonably ambitious growth plans for a market still in its infancy. Arcano Investment Advisors plans to add three to four new families every year to the six that have already started working with the unit since its inception, two years ago. Mr Susaeta estimates that, if they succeed to do so, the volume of assets under administration by his department, today at €650 million, will grow by some €300 million a year.

MdF Achievers' Mr De Fernando says the firm is working at the moment with about 10 families, and the idea is to add two or three new clients to the firm's portfolio every year. The older half of the merged firm, Achievers, has been around for five years.

Achievers was set up by Mr Muguiro and Cristina Rembado. The other two partners are Jose María Michavila, a lawyer who is also a member of the Spanish parliament representing opposition party PP, and Daniel Gómez, who was the CEO of Gestefín, a single family office that turned into a multi-family office and now is also part of MdF Achievers. The firm also has an agreement with the UK’s Lord North Street to provide research and other services to their clients.

The expected growth of the market has convinced some family offices to re-organise themselves to more effectively represent their interests in the Spanish financial market. The proper implementation of new rules for financial advisors in Spain is one of the things the participants of the initiative want to push ahead.

Mr Durán said many companies may have ambitions without realising what it takes to succeed in a difficult and slow moving market. He said that in the US it takes 15 to 16 years for a multi-family office to mature its business, but some of the new players getting into the Spanish market are looking at returns in the short term. "The industry of real multi-family offices is minimal in Spain. But we are seeing a process of intrusion in the market by companies without the structure required to serve their clients properly," he said.