GET TO KNOW MOREFamily Offices
Family business owners (or business families) & serial entrepreneurs create wealth across one of more generations. As they focus on their core businesses they also need to focus on creating a financial wellbeing platform for their families and segregate their business wealth from personal wealth.
In its most general form, a family offices are segregated team created by a family to meet its unique wealth & investment needs, facilitate creation of a wealth holding strategy, structure a family governance plan & create & manage a formalised philanthropy vehicle. Some family offices also handle the lifestyle & travel needs of the families that they serve.
Single Or A Multi Family Office
Single Family Office
If a family decides to hire its own internal team across the major functions of a family office it is known as a Single Family Office. In this structure the family will normally hire a CIO and a team of investment professionals supported by operations & finance support members.
For families with large wealth portfolios and complex requirements a CEO might also be required to oversee the function of the family office as the team required to manage the various functions needs proper business oversight.
The biggest challenge for such a setup is the cost of running the overall team, ability to hire & retain quality talent and also family time needed to oversee the whole function.
Multi Family Office
A more efficient solutions for families wanting superior quality of advice along with lower cost is to be part of a Multi Family Office platform. This kind of a family office works with multiple families even though they still provide customised service for each family.
Since the expertise of the investment & advisory teams and the support functions work with many clients the cost of working with a Multi Family Office is usually much lower that setting up a single family office. Also the family benefits from the wider experience of the Multi Family Office gained from working with a large number of clients.
This constant compounding of experience creates a big knowledge bank with the Multi Family Office which can benefit each client of the platform.
Setting up your Family Office
Key questions to ask yourself
- Is it worthwhile to hire a talented & experienced team and pay for the cost of running a single family office with adequate expertise?
- Is the total cost of running the family office with a full staff impacting your investment returns?
- Are you getting quality resources at your desired levels of expenses?
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- Are you looking for only the investment function or you will need to provide services to other areas like estate planning, philanthropy, social impact investing etc.?
- Do you require inhouse talent for all services?
- Market level compensation and other benefits are just one aspect of finding, attracting and retaining the best individuals to oversee a family office’s operations and services. Just like any employer the family office must have a strong value proposition and provide prospects with a desirable career path. Post-hire, family office managers need to manage employees and focus on retaining talent in the same ways that other established employers do. Continuity is also a key factor if the family office loses key employees over the period of time and creating a bench strength will only add more costs to the running of the family office
- Having a well-resourced staff dedicated solely to one’s family can certainly result in valued advice, excellent service and meaningful relationships if the firm hires employees who truly understand the family’s needs and motivations. Alternatively, with a multi-family office, a family can also experience client service excellence and deep relationships. One potential benefit of the multi-family office model is that experience working with many families allows client service professionals to leverage knowledge gleaned from other relationships to provide useful information about what other families have done in similar situations to arrive at the best possible solution for clients.
- Do you have an interest in creating a business – and the time required to do so? The steps involved in building a family office, practically speaking, amounts to starting a business. It requires tremendous amount of work and oversight. Single family offices may also need a family governance infrastructure which helps the family with succession planning and preparing the next generation to inherit wealth – often a leading concern among founders – and helps maintain transparency across the family and prevent disputes.
- For those who enjoy the excitement of creating an organization and have the time, or those who want to occupy retirement with meaningful and personally rewarding work, starting and potentially managing a family office may be a great option.
For those who don’t want the hassle, the right multi-family office may be a better alternative because it provides more of a turnkey solution. Also the breadth of experience that quality Multi Family Offices bring to the table is the reason that even single family offices engage with them with an intent to get better insights and solutions in investing.
