What is a Family Office?

A family office is a private wealth management firm that serves as a financial one-stop shop for the ultra-wealthy. A family office provides personalized financial services that go beyond financial planning and wealth management to deliver a comprehensive solution to effectively grow and transfer wealth across generations.

Today, family offices are growing and evolving as new family offices open, led in part by a new generation of increasingly digital tech entrepreneurs. Many of these offices are taking a slightly different millennial approach, giving rise to more hybrid and virtual family office models supported by advanced AI and cybersecurity measures and reshaping the traditional family office structure.

Catalyzed by these changes, family offices are more prevalent than ever, though their value is best realized among Ultra High Net Worth (UHNW) families with investable assets of $30 million or more. The wealthiest families often have complex financial lives, and a family office provides an outsourced solution that relieves them of the burden of wealth management so they can focus on what matters most.

What is a Family Office?

A family office manages everything from investments, trusts, and private wealth to property management, charitable giving, tax planning, and day-to-day accounting. This all-in-one solution goes beyond the traditional services offered by a financial advisor or even wealth manager, often taking responsibility for even the minute details of their client’s financial lifestyle and goals.

Family office services may include:

• Investment management
• Family business bookkeeping and accounting
• Travel management
• Charitable donations
• Tax preparation and planning
• Budgeting
• Insurance
• Property management
• Wealth transfer
• Payroll
• Litigation

Family Offices

There are three traditional models for the family office. While we’re seeing new family office structures arise today, the dedicated family office, multi-family office, and outsourced office are still the most commonly used office models.

Dedicated Family Office

A dedicated family office, also known as a single-family office, handles the financial and family affairs of just one family. Typically, these families have extensive needs and incredible wealth with assets over $100 million, requiring the full attention and engagement of a team. Single-family offices are full-time business operations managing the nuance of dynastic wealth while growing and preserving wealth for generations.

Multi-family Office

A multi-family office provides the same breadth of services but to more than one family. This shared model allows affluent families to cut costs while still benefiting from done-for-you financial services. Modern technology is making multi-family offices more efficient, thanks to developments like artificial intelligence and RPA that can automate repetitive and tedious tasks, freeing up human team members to focus on services where their skills are best utilized.

Outsourced

An outsourced family office can follow the model of either a single-family or multi-family office. It simply calls on a collaborative effort from various individuals or companies to provide the same services separately that a traditional family office would normally offer as a comprehensive package from a single provider. Outsourced offices cost less, but because the model involves multiple moving parts with less cohesion and communication between parties, it offers the least amount of control to the client.

Who Should Have a Dedicated Family Office?

While family offices best serve families with a net worth of over $30 million, it doesn’t mean that every family that falls into this bracket needs a dedicated family office to successfully manage and preserve their wealth.

Dedicated family offices provide services that are especially helpful to family leaders who would otherwise be tasked with the job of financial management, those who travel often, those with many children who will one day inherit a large amount of wealth, and those with complex financial portfolios. They are highly recommended for anyone with over $100 million in assets, in particular.

For families who don’t quite reach the $100 million mark, a multi-family office may be a better solution that provides similar services with the added benefit of cost-sharing with other families.

Top Considerations Before Opening a Family Office

If you ask financial advisors, many will tell you that all families above a certain net worth should open a family office, and they’ll use net worth ranges alone to determine whether you should open a single-family office or a multi-family office. However, there’s more to it. While the balance sheet should certainly be taken into account, it’s not the only thing you should consider before determining if you should open a family office and what kind of office that should be.

• Size of Wealth – Size of wealth is often the first thing used as a benchmark to determine if a family would benefit from a family office. While it doesn’t describe your family’s full financial picture, it can help you determine if you have the necessary income streams to cover the costs of the staff and give you an idea of the level of service you would require should you open a family office. Net assets are important, but the most critical indicator here is your family’s total sustainable income. After paying for all bills and lifestyle needs, will there be enough left over to go toward your family office services?
• Financial Complexity of Assets – Your income alone may more than qualify you to open a family office, but if the complexity isn’t there, it may not be worth the overhead cost. A wealthy family may hold a single portfolio filled only with stocks and bonds, and those financial assets are simple and don’t take much time, so you may be best served to handle your finances yourself or hire a smaller team of financial advisors for additional support where needed. On the other hand, if you have multiple rental properties, are preparing to bring your children into the family business, have multiple global portfolios across various asset classes, and evolving financial needs, a family office would be invaluable.
• Family Needs & Services Required – A single individual, while not technically a family, can still hold their own family office. However, most are built around an actual family and its goals center around the legacy the family hopes to one day leave behind. Opening your own single-family office is a big undertaking, building a new enterprise from scratch, complete with interviews, HR protocols, office politics, and regular performance reviews. While the family office team will be able to take many tasks and responsibilities off the principal’s plate, it also adds the additional responsibility of managing the company itself. If all of this sounds like too much, opting to join a multi-family office that is already operating can save you the involvement.

Fee Structure

Most family offices use a fee structure based on a percentage of the assets managed by the team. Depending on your net worth, you can expect fees similar to:

Multi-family Office vs. Dedicated Family Office: Checklist

There are many moving parts that all play a role in determining whether your family should select a multi-family office or a dedicated family office. To make the decision easier, these checklists may be helpful.

You may benefit from a dedicated family office if…

• Your net worth exceeds $100 million
• Your liquidity exceeds $50 million
• Your annual income, after sustaining your lifestyle, exceeds $3 million
• You have at least 10 private investments
• You have at least three personal assets, such as homes, boats, planes, etc.
• You would like to have someone evaluate potential new investments occasionally
• You feel that you need help to keep track of financial affairs such as bills
• You have no issue with managing a team of people
• You have children that will need help to manage the wealth they inherit
• Your estate plan is complicated

You may benefit from a multi-family office if…

• Your net worth is below $100 million
• Your liquidity is below $50 million
• Your annual income, after sustaining your lifestyle, is less than $3 million
• You have fewer than 10 private investments
• You have two or fewer personal assets such as homes or boats
• You don’t need additional support managing your financial affairs
• You don’t want to manage a team of people
• Your children will not need help to manage the family wealth
• Your estate plan is simple

Deciding on a Family Office

When your family wealth exceeds $30 million, you start to function more like a business. There are the day-to-day financial responsibilities, but there are also the long-term goals to grow and scale, much like a business.

A family office turns these responsibilities and goals into a legitimate enterprise, offering a wide range of highly personalized services based upon each family’s current picture and long-term goals.

In addition to a family office, there are several different wealth preservation strategies UHNW families can employ to grow and protect their fortunes, such as charitable giving, investment diversification, incapacitation planning, tax minimization, and more. At Weber Global Management, we specialize in wealth management for UHNW individuals and families with an experience tailored to each client’s unique financial and lifestyle goals. To learn more about how Weber Global Management can create a customized wealth plan for your family, reach out to our team.