The growth of the family office has exploded over the last couple of decades with technological innovations, entrepreneurial success, and the overall development of the wealthy demographic. This can be highlighted by the various offerings, such as the traditional family office that is designed for families of $100MM net worth and above, the multi-family office tailored to families with a net worth of $50MM-$100MM, and the outsourced family office that fits families under the $50MM net worth threshold. Families are now asking themselves if a family office is something they should pursue, if it fits their needs, and if it fits their budget. When considering if a family office makes sense, several factors should be assumed that fall within three categories: size and diversity of assets, complexity, and family goals.
Size and Diversity of Net Worth
The first consideration would be determining which style of Family Office would fit your net worth. The most straightforward determination would be the size of your family’s net worth. This is vital due to the costs involved in maintaining a Family Office. This is why the multi-family office idea came together as families in the $50MM-$100MM space pooled resources to hire an entire team to serve various families. The traditional family office includes in-house counsel, accountants, investment professionals, concierge service providers, and family executives. This innovation gave access to successful families to the family office model, which led to the outsourced family office.
The diversity of assets will also contribute significantly to determining whether a family office would be a good fit. If the family has a relatively small number of holdings, such as an operating business or extensive market portfolio, hiring an entire team may not be the most impactful way to spend their cash. When families diversify their holdings amongst various asset classes, proper oversight and due diligence become much more cumbersome. Additionally, most traditional wealth advisors solely work in the market-based investment space; families interested in alternative or non-market investments may find a family office more suitable to fit their desires. By hiring a coordinated team that can oversee the full deployment of cash into various asset classes, we can accurately report on progress and performance while fulfilling the goals and priorities of the family. This becomes more important as the asset size and diversity grows.
Complexity
The complexity of a family plays a significant role in the need for a family office. This does not solely include their asset mix but also has family dynamics, involvement levels of various family members, tax and estate planning issues and concerns, business planning, and generational planning, among other priorities. As the complexity of a family grows, the desire for a dedicated, coordinated team to work through all the moving parts tends to become more important for the family. By relying on an objective team that is dedicated to providing transparent advice based upon the vision and values of the family, a family office can provide simplicity for a family that would rather spend their time enjoying their wealth.
Family Goals and Priorities
What may be paramount in deciding whether a family office, of any level, would be an ideal option for a family would be their goals and priorities. While many successful families utilize a variety of advisors in tax, legal, and financial matters, some families value a coordinated team dedicated to designing solutions and services customized to their particular family. Though single and multi-family offices hire that team in-house, the outsourced family office typically consists of a firm that provides complete accounting services, from bookkeeping to tax planning to merger and acquisition services, coupled with a financial team that may or may not rely solely upon market-based investments. By deploying a dedicated team, the family’s privacy and confidentiality of their various decisions are of utmost importance. In addition, families gain back the gift of time by allowing their team to evaluate all potential options and discern what solution best serves the client’s ultimate goals and can report to the family. In the past, when families had separate advisors, they typically bounced between their CPAs, their attorney, and their financial professionals, and they were ultimately the decision-makers. Therefore, by deploying a team solely focused on the family’s success, a family office can impartially quantify and implement the necessary actions to help the family achieve the things that are most important to them.
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While not all families will desire or utilize the services of a family office, when this solution does work and is fit for a family, it can have a significant impact on their time, energy, and focus on the activities that bring them the most joy, and their bottom line. Calvetti Ferguson and CF Financial have launched their outsourced family office to serve successful families that need to make more sense for the traditional family office or have the liquidity minimums for most multi-family Offices. Should you want to consider whether an outsourced family office is a fit for you, please fill out the form below. We look forward to speaking with you soon.