What is a Family Office?

family officesA family office is a private company that manages the financial affairs of wealthy families. Often, these private companies manage the affairs of several wealthy families so a more apt definition is multi-family office, MFO.

These offices provide financial, tax and legal expertise all in one shop. The very first family office was set up by John D. Rockefeller in 1882 to manage his family’s money. Today, there are over 3500 family offices in the United States, competing for $46 trillion in assets.1

Probably the most important aspect of a family office is to grow the assets of the family after considerations for taxes, inflation and fees. But there must be enough liquidity for the family members to manage their day to day expenses and lifestyle.

Family offices generally target the newly wealthy, those that have made a large amount of money in this generation. They don’t actively target ‘old money’ who are presumably already being serviced. For many, $50 million is the standard family they try and manage. This is the threshold for being considered “super rich” and encompasses a miniscule percentage of the world’s population. Globally, there are roughly 124,000 families worldwide, and growing, that meet this threshold so there are opportunities for newer family offices to service them.2

Family Office Services

Family offices provide every service imaginable to best guide their clients complex financial needs. These typically include tax strategies, philanthropic advisory, legacy planning, financial services, insurance advisory, risk management and services for family-owned businesses.

While the majority of the efforts are aimed at the financial affairs of the family, it can also involve tasks such as managing the family’s staff (cleaning services), scheduling medical appointments, bill paying as well as making travel arrangements for family members. These are normally referred to as ‘concierge services’.

Since much of the wealth that has been created comes from family businesses, this is a focus for many family offices. The issues family businesses face are many from small business funding options, liquidity considerations, transfer tax reduction and continuity planning for successive generations. And when it comes time to sell your business, they can often provide advisory, valuation and provide brokerage services for the transaction.

The last thing an ultra-wealthy family wants to think about is having some event jeopardize their success. Family offices also provide valuable risk management services including advising clients on the best ways to keep their wealth with asset protection services. This can be in the form of taking preventative measures when expanding the family through marriage or managing risk of an accident occurring. Many family offices will recommend a personal umbrella liability policy or a more customized insurance strategy.

Finally, if the source of your family’s wealth is highly concentrated, family offices provide expertise to minimize event risk. These include hedging services, diversification strategies and estate planning advice.

Selecting a Family Office

If you’re trying to decide which family office to select (a nice problem to have) you can always rely on the services of a consultant who will select the perfect family office for your individual needs. According to the Wall Street Journal, this will set you back between $15,000 and $80,000 for the consultant but if you’re that wealthy what’s the difference?3

If you want to find the right office yourself, you have some decisions to make. On one hand, you want the objectivity and independence of a smaller family office that services your account on a strictly advisory basis, resulting in minimal conflicts of interest.

On the other hand, without a deep-pocketed firm, it’s difficult to access the most attractive private investments, including certain hedge funds and other alternative investments. Without access, it will be difficult to meet targeted investment returns on a risk-adjusted basis. In strong market years the returns would be fine, but the family’s wealth would be challenged in a severe market downturn.

Another consideration is whether to go with a single family office (SFO) or an MFO. Experts advise if you have between $10 million and $250 million, go with an MFO.4 You probably won’t need all the services and attention that an SFO has to offer and you will pay for them regardless. Anything over $250 million, go with an SFO for the personalized attention the uber-wealthy need.

Family Office Fees

Multi-family offices are increasingly charging a flat rate for their services. According to Worth Magazine, $250,000 is a typical annual rate.5 Sometimes the fee structure varies. Attorney service may be billed on an hourly rate, retirement planners may charge a flat fee and an asset manager may charge a percentage of assets under management.6 The Wall Street Journal says fees for family offices typically run between 0.25% and 1.50%.7 Like with many service businesses, make sure you try and negotiate down the fees to the best of your ability.

For the Single Family Offices of the filthy rich, the fees are easily $2 million annually and often much more.8 Depending on the complexity of your specific situation, a family office’s price may actually save you money from having to find each independent professional service for incidental purposes. This includes accountants, lawyers, and possibly real estate and business brokers. It certainly is simpler. You’ll probably receive superior services as well, given the relationship.

Converting to Family Offices

A growing number of hedge fund managers are turning to the family office model to manage their personal wealth. This list includes and Steven Cohen, George Soros, and Soros’ old partner, Stanley Druckenmiller who broke the Bank of England by shorting the British pound (yes there was life in the currency markets before Brexit).

These managers don’t want to deal with the stress of dealing with investors as well as mounting Securities and Exchange Commission (SEC) regulations. Since the money that is managed is all internal money, not from outside investors, family offices don’t need to register with the SEC.

Getting a Job at a Family Office

If you are looking to join a family office team, here are some tips to help. Preferably, candidates should have a Master’s degree in finance or a bachelor’s degree at a minimum. Without an advanced degree, a professional designation such as a CFP, CPA or CFA will probably be necessary.

Some family office teams also have legal professionals to handle a wide variety of needs that may arise.

As an example, Matter Family Office in St. Louis has a family office team of 30 associates. Of these, more than half have either a Master’s degree (typically an MBA), a professional financial designation including CFP, CPA or CFA or a legal degree such as a JD (Juris Doctor).9 In addition, as is the case with other family offices, they keep a compliance consultant on staff.

Family offices tend to be very interested in such academic credentials.

Going the headhunter route is not as effective for family office employment as in other areas of the financial industry.10 The best way to work for a family office getting to know the family. And it’s OK if you don’t hob nob with an affluent family. Plenty of people are employed by wealthy families through the businesses the family runs.11 If you can impress at the business and get noticed, it might open some doors for you. Finally, family offices value experience, so young guns might not be the best fit in terms of experience as well as culturally.


Family Offices: Movin’ on Up
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Family Offices: Movin’ on Up
A family office is a private company that manages the financial affairs of wealthy families. Today, there are over 3500 family offices in the United States.
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