There’s an old industry saying, “If you’ve seen one family office, you’ve seen one family office.” That’s because these private investment and wealth management boutiques created to serve the needs of a specific family, come in many sizes and shapes.
But one thing virtually all single-family offices (SFOs) have in common is that they outsource certain services. This is critical. Understanding the SFO universe, how they work with external providers and how your services can fit in with their in-house and other outsourced suite of advisors is key to building fruitful relationships with the wealthiest of families.
Range of Services
SFOs offer a range of services both internally and from outsourced professionals. These cover such areas as:
- portfolio allocation;
- specific investment strategies;
- recordkeeping and reporting;
- tax planning;
- risk management;
- administration;
- trust and estate planning;
- family governance;
- philanthropy; and
- concierge.
I’ve worked with SFOs that employ as many as 60 in-house specialists to as few as one with an office manager. At one end of the spectrum, these offices are largely administrative and serve as a quarterback to manage various outsourced service providers and maintain a clear picture of the wealth management framework. At the other end, they have teams of in-house experts that work solely for the family on all aspects of investment and wealth management.
It’s important to note that they may serve a single-family unit or multiple generations and branches of a family.
This is confusing to say the least!
Four Tips
Here are four tips to explore to help you better understand and build a trusted advisor relationship with family offices:
1. Understand the structure of the office. What services are handled in-house and what are outsourced? It’s not uncommon for SFOs to have a mix of in-house and outsourced advisors, particularly if they need a specialist expert or if they simply want to diversify as a check to ensure they are not becoming insular and missing opportunities or new thinking. What other advisors both in-house and outsourced work for the family and how are they coordinated? You can’t operate successfully within a bubble. How does your expertise fit in with that of others who work for the family? Who in the office is the key decision maker?
2. Learn the core objectives and focus of the office and why the family chose to create it. For example:
- greater control, confidentiality or better coordination and transparency of services;
- investment management to preserve or grow wealth;
- management of operating companies;
- achievement of economies of scale; or
- bonding of the family post liquidity event.
3. Be cognizant of family dynamics.
- How do dynamics impact decision making?
- How does the SFO and the family operate as a unit and on an individual family member basis?
4. Make use of available resources. Here are two new ones to consider:
- Family Offices: The STEP Handbook for Advisers, is an excellent resource to gain a baseline understanding of the many forms family offices may take and the rationale behind how these structures and modes of servicing families of affluence meet particular needs. It provides a point from which you can develop a line of questioning to ensure you understand the nuances of a prospective or existing family office client so you can best serve them.
- The Global Family Office Report 2014 and its soon to be released 2015 companion study from the Institute for Private Investor’s sister division, Campden Research, offers the most comprehensive look at families offices to date. This report is based on surveys and interviews with 200 family offices and provides a bird’s eye view from the family members and the office executives on why they chose to run their offices the way they do, costs and what weighs most heavily on their minds.
Working with the ultra-affluent can be highly rewarding and great business. To be successful you need to truly understand the needs and motivations of these most discerning clients and how your expertise fits into and can benefit their family offices.
If you would like a copy of the Global Family Office report, please send me an email at [email protected].