Learn the basics of what a single family office is and the help it provides to high net worth individuals!
What is a Family Office? Single Family Office Structure?
Compared to the typical investment brokerages and wealth management organizations, single-family offices have a unique organizational structure. Single-family offices include various large investment groups and wealth management services with just a few back-office employees. For our discussion below, the terms “family office” and “single-family office” are utilized interchangeably.
What is a Single Family Office (SFO)
In general, a single-family office is a private wealth management organizational structure that handles the personal and financial affairs of high net worth individuals and affluent families. There is no standard for how one needs to be structured since a single-family office is driven primarily by the needs and goals of the family. Some single-family offices focus specifically on investment advisory with a skeleton crew. In contrast, others are multifaceted organizations with in-house personnel, various vendor relationships, and a broad platform of financial services.
Overall, the sole function of the management group is to ensure that the personal wealth, goals, and concerns of its owners are pursued in a conflict-free and independent manner.
Families might develop a family office to support their general financial requirements, after the sale of a family business or another considerable liquidity occasion. Every family workplace is as distinct as the family it serves.
Family workplaces can provide a vast array of services, consisting of:
Financial services and financial planning
Risk Management
Wealth Planning
Investment management
Tax planning and Tax Strategies
Business Succession Planning
Estate planning and preparation
General Advisory Services
Philanthropic preparation
Family education & multi-generational preparation
Lifestyle management services
Preserve control of their possessions and the decision-making procedure
Gain from the collective purchasing power of the family’s combined assets
Have a dedicated group committed to assisting and offering key services to achieve long-lasting goals
Multi-Family Office vs. Single-Family Office Structure
A multi-family office (MFO) is a wealth management company that uses highly personalized services to serve several families’ financial goals.
Families with assets up to $20 million might be best served by a multi-family office. MFOs are similar to single-family offices in that they allow households to access the advantages of a devoted single-family office without the overhead. Single-family offices are typically reserved for ultra-high net worth individuals and families.
Obviously, one of the key functions of the family office structure is to handle investments, it goes without stating that family offices will have key jobs related to the management and administration of the family’s wealth.
Financial Jobs of a Family Office Structure
The financial side of the family office structure is normally comprised of a Chief Executive Officer (CEO), a Chief Financial Officer (CFO), a Chief Operations Officer (COO), with the financial investment aspects of the single–family office being managed by a Chief Investment Officer (CIO). Under the CIO’s guidance, there will be Accountants, Tax Specialists, Analysts, Portfolio Managers, Investment Managers, Trust Officers, Wealth Planners, and so on. This group manages investments in financial markets, either through external asset managers or own specialists (or a mix of both types).
Legal Division
Together with financial management and financial advisors, there will typically be a legal division. Notably, a family office might include a private attorney, firm, or General Counsel. The legal counsel may be responsible for both business and personal matters.
Back Office Support
The back-office support staff that does the daily work and necessary operational functions of family offices include but are not limited to, Public Relations, charitable giving, HR & Operations, Public Relations, Portfolio Management, and IT.
The family office structure would typically have an administrator or personal assistant, either for the family office or workplace, or it may likewise be available for use by the entire family outside the office.
Another non-financial job function of a family office structure includes overseeing the personal affairs of the family, and normally this would include family/domestic personnel tasks, such as Housekeepers, Estate Managers, Butlers, Valets, Chauffeurs, Gardeners, Nannies, and more.
This personal element could encompass the other possessions that a wealthy family may own asides from their properties, such as yachts or personal jets.
It needs to be noted that some of the functions above, especially the financial and legal, can be contracted out to third parties.
Private Equity and Venture Capital
Most investments of family offices in private companies are made through larger private equity and venture capital funds as so-called, Limited Partners (LPs). The PE & VC team is also reporting and controlling family office investments. Sometimes, the PE & VC team is also responsible for the monitoring of the family business.
Real Estate Division
Most single-family office structure will have a real estate department. The real estate division of family offices is mainly dealing with the asset management of existing properties and the acquisition of new objects. Some family offices are mainly focused on real estate investments and asset management.
As a family grows and transitions towards future generations, not all members of the family might have an interest in or have the skills appropriate to handling the family’s assets. In such cases, it typically is up to one family member to handle the family’s assets on behalf of all relatives, or a single-family office may be created
Video Transcription
Meet Brett
Brett meets Eric at a multifamily networking conference!
Eric tells Brett that he works at a single family office an (SFO)…..
Brett wants to know what a single family office is and its importance??
Eric explains that a single family office is a wealth management firm for high net worth families….typically with a minimum of 10 million dollars in investable securities!
Single family offices help assist families in a variety of ways including wealth management activities, estate planning, tax optimization, charitable giving, and many other areas that help administer their clients wealth and overall lifestyle!
Eric goes on to say that single family offices get paid a premium from their clients in the use of their services…
Brett wants to know why someone would need to use a single family office?
Eric explains that it takes a lot of effort and expertise to successfully manage high net worth families. Imagine just the paperwork if you had 100 different investments to keep up with!!
Eric states that it is very beneficial to have a team of highly experienced professionals to help make educated decisions regarding all aspects of wealth management!
Brett is excited to now understand the role of single family offices and the factors they play in helping high net worth families!