In its purest sense, a “single family office” is a private company that manages the overall affairs of a single family including wealth management. Typically, a fully functional SFO will engage in all, or part of the businesses, investments, fiduciary, legal, taxation, trusts and estate management of a family including managing personal services such as managing house hold staff, purchases for the family and making travel arrangements. Many SFO’s also have a concierge function.
A multi-family office will manage the financial affairs of multiple families, who are not necessarily connected to each other. Like a single family office, an MFO might also manage the fiduciary, trust and estate business of multiple families, as well as their investments. Some will also provide concierge services. Most MFOs are commercial, as they sell their services to other families. A very few are private MFOs, whereby they are exclusive to a few families, but not open to others. Over time, SFOs often become MFOs. This transition is often due to the success of the SFO, prompting other families to push for access. Economies of scale are also often easier to achieve through an MFO structure, promoting some families to accept others into their family office structure.
Families looking to achieve the benefits of a family office managing their personal, business, financial and other affairs, but who do not wish to set up an actual company to do so, can opt for a virtual family office. This can be achieved by outsourcing all services to external service providers or Family Office Companies.
It’s common for wealthy families to appoint an independent “Family Office Advisor” for the first few years before setting up a dedicated family office so that they can derive the benefits of a family office without having to structure one. This also works out to be the most cost efficient model for the initial years. Important qualities that wealthy families look for in a Family Office Advisor” are Professionalism, Integrity, Credibility, Fairness, Non-Discriminatory, Leadership, Trustworthy, Knowledgeable, Hard Working, Meticulous Communication, Patience, Persistence, Wisdom and Understanding.
A good “Family Office Advisor” can be an effective bridge between the family, family’s businesses, senior management employees across geographies, auditors, lawyers, tax consultants, doctors, business associates and so on. Depending on the requirements, Family Office Advisors ( FOA’s) take part in business affairs like participating in board meetings and giving their inputs or taking part in strategy meetings etc.
As concerns about family conflicts, unhappy separations, wealth preservation and succession planning within family businesses continue to rise, wealthy families are increasingly evaluating the benefits of appointing family office advisors for the family.
It’s believed that at least 500,000 family offices across the world still operates under the traditional stewardship model even today and while many of them are making attempts to transition themselves into the modern-day models of Single/Multi Family Office or Virtual Family Office, it might take more time for the conservative families to evolve into the new model.