Family groups decide to start family offices for many different reasons. One common catalyst is to invest the assets generated by the sale of a family business (or after another realization of significant liquidity). Family Office Exchange (FOX) research indicates that for a family with US$100 million or more in assets—and if the family has a desire for privacy and control and is willing to manage a sophisticated financial business—it makes sense to consider a dedicated family office. Many other experts put the minimum size of family wealth to justify a single family office at over US$500 mln.
It’s a challenging question, as every family is different. However, FOX has identified 10 key reasons to start a single- or join a multi-family office:
- Education of owners – preparing owners to be responsible stewards of their wealth
- Financial security for owners – to ensure that family members can continue to pursue their current lifestyles while optimizing the wealth transfer to future generations
- Confidentiality of information – protection for the family’s privacy and security of financial information
- Continuity of the family – many families rely on the office to foster a sense of community and family unity over time
- Customization of financial services – developed with the clients for the clients, and they just pay for what they need
- Coordination of advisors – the family offices coordinates the expertise and talents of many external advisors
- Development of wealth strategy and investment strategy
- Purchasing power to access products and reduce fees
- Alignment of interests and integration of goals – offices help families understand and capture the benefits of shared ownership by assessing the impact of each decision on individual and family goals
- Coordination of trustee and beneficiary responsibilities – the family office provides invaluable services in helping trustees successfully assume their responsibilities in administering family trusts and educating the beneficiaries
Living a life with wealth comes with many opportunities and the ability to experience some of the greatest pleasures and passions that the world has to offer. Behind the scenes, however, the financial and administrational challenges faced by these multi-generational families means that a considerable amount of their time can end up being spent on managing the day-to-day, coordinating a myriad of advisors and, in many cases, facing inter-generational challenges.
As mentioned above, family groups decide to join a family office for several different reasons, however, in almost all cases it involves a considerable change and many facets need to be considered, which is not only incredibly time consuming, but also can be very overwhelming. To get through this smoothly and with the best advice, you need trusted advisors and objective advice from experts. This is where a family office can add considerable benefits.
Working with a family office can benefit families many ways, including:
- Preserving wealth through proactive management and appropriate strategies
- Mitigating risk by diversifying investments
- Assisting with the transfer of wealth from one generation to the next through strategic asset allocation and estate planning
- Working with other professionals, including attorneys and CPAs, to ensure all advisor work is coordinated and strategies are integrated
- Proactive, personalized, and responsive service
- Support in finding a common family purpose and dealing with inter-generational challenges
As mentioned previously, one of the greatest challenges can be finding objective advice and this is considered to be one of the greatest attributes of family offices. Philip Marcovici, a global wealth management consultant, agreed, stating that he believes one of the other factors driving clients to family offices is the disillusionment with third-party money managers, fuelled by scandals over opaque and abusive fees, and banks pushing their own expensive products, or those of partners, in return for kickbacks.
Many families with complex financial affairs do lots of direct investing in real estate, private equity, for example. There are few—if any—firms who are qualified and properly incented to help someone evaluate a particular deal or fund. Usually, the person advising you to do the deal are involved in getting paid if it closes. That isn’t objective advice. If you don’t have the knowledge or time to evaluate a given deal, it is easy to see how you could be taken advantage of, which is again where lack of time and a lack of trusted advisers with common values can become a strain on families of wealth. In addition to investment expertise and objective advice, family offices generally help to find co-investment opportunities, help transition business control (not just legal, but effective control), support in training the next generation of the family on the responsibilities of wealth, support with philanthropic efforts and much more.
This overview piece is a collaboration of thoughts from each Wigmore firm following these questions being asked more frequently than you may think. If you would like any further information regarding the Wigmore Association please contact us through the website.
 Family Office Exchange. Do I need a Family Office? https://www.familyoffice.com/understanding-family-office/do-i-need-family-office.
 Monnier, A. (2018, August 31). 10 Reasons to Start a Family Office. Retrieved from https://www.familyoffice.com/insights/10-reasons-start-family-office.
 Hutchinson Family Offices (2019). Retrieved from https://www.hutchinsonfamilyoffice.com/what-is-a-family-office-and-how-can-it-benefit-my-family/.
 Economist (2018, December 13). Family offices become financial titans.
 Parker, F. (2016, May 19). What are the advantages of having a family office? Retrieved from https://www.quora.com/What-are-the-advantages-of-having-a-family-office.