WHAT IS A FAMILY OFFICE, AND HOW DOES IT WORK?
Centro LAW A family office is a wealth management service unity for wealth owners and their families. It acts as a one-stop-shop and trusted advisor for high-net-worth individuals and families. There are no minimum wealth thresholds to work with a family office. However, substantial assets under management are required to justify the costs of family office services.
There are two main types: The Single Family Office Single family offices provide services to only one family. This is the most sophisticated option for a family and the most expensive. A single family office prevents conflicts of interest and ensures the highest level of service personalization in an aligned framework. It is ideally positioned to assist a family in generational wealth preservation and transfer. Since a single family office is tailored to the individual family's needs, there is no unified standard for size, governance, and service levels.
The Multi Family Office These professional organizations provide family office services to several unrelated families, leveraging infrastructure and talent to simplify and accelerate a personalized wealth management process.
Many multi family offices are commercial as profitoriented businesses. They can be held privately and not be affiliated with financial institutions or be owned by financial institutions. Since there is no unified definition, asset managers also use the label multi-family office for marketing their services. Some multi family offices were initially single family offices that started to offer their services to several families. In particular, after the 2008 financial crisis and the loss of trust in large financial institutions, there has been a rapid expansion of multi family offices. Due to technological progress, multi family offices are onboarding more families without compromising their service quality. Still, scalability has its limits, and thus the industry is currently going through consolidation with fewer but more prominent players.
What are Family Offices doing? Since no family office is like any other, there is a wide variety of services. However, research tells us that they mainly focus on strategic asset allocation, risk management, real estate management, and accounting and reporting. These services are all investment-related, although external service providers usually perform investment management. The family office can select and monitor the investment manager in such an event. Additional non-core offerings are tax planning, estate planning, financial planning, and legal services. Often family offices provide services as a mix of in-house and outsourced capabilities. Ideally, it is structured as a comprehensive network of service capabilities to cover all wealth-related aspects of affluent families.
Depending on the family's needs, they may also offer concierge services, management of high-value assets, consulting, project management, and administrative services. In evaluating which family office is ideal for them, families should develop a clear understanding of needs and risks to be managed and how they translate into objectives and expectations to be met. The focus on core capabilities ensures outstanding services delivery, and with the assistance of technology, additional services can integrate into the individual framework. In our view and experience, there is one principle to follow: investment management and control should not be executed by the same service provider. Only such a setup enables effective control, monitoring, and oversight.
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