Prices change at multifamily offices as well

Following up on JLM's observations below on falling fund expenses, this article from InvestmentNews-- Multifamily offices rethink their pricing-- reveals another new approach for pricing investment services for the wealthy. Interestingly, the multifamily offices are not adopting the 2 & 20 approach of the hedge funds. Instead, they are adopting flat rates!

One of the benefits of flat rates is that they "match up the interests of the multifamily office and the family."

Asset-based fees tend either to overcharge or undercharge the client, according to Brian Hughes, senior vice president and national director of business development for Jenkintown, Pa.-based Pitcairn Financial Group.

What’s more, he said, firms usually lack benchmarks when determining fees to help them accurately gauge a fee break point that is both favorable to the client and profitable for the firm.

That's odd. I've always been taught that a percentage of assets fee is the model that best aligns the interests of the manager and the client—"Our compensation won't go up unless your portfolio is growing." However, asset-based fees are apparently problematic when major philanthropy is on the agenda, according to the article.