A single-family office has become an increasingly popular solution for wealthy families to manage their wealth. Its advantages over other wealth management solutions are one of the key reasons. Among other things, it can be explained by the general concentration of wealth and better settlement of family disputes within the framework of a joint company.
An important factor is undoubtedly the loss of trust in banks and their asset management services, especially after the financial crisis. As a result, wealthy families wanted to have more oversight over their finances and wealth management.
What is a single-family office?
Single-family offices have been around for a very long time, in all sizes and shapes, but it is only since the beginning of this century that they have become more prominent. Depending on the family, their single-family offices will be organized in a distinct way. Therefore, it is difficult to give a precise definition of a single-family office, because their services vary so much from one another.
A single-family office is a type of family office that is privately controlled by a single-family. It has a very specific structure in place, with the goal of assisting a wealthy family, in organizing, managing, and preserving their wealth. Its services vary, but its main goal is to manage wealth and assets and assist the family in legal matters. Some single-family offices also conduct other activities providing different accommodating services to help the family with their needs and desires.
The definition is intentionally broad because the set-up of single-family offices and how they operate can vary widely. Families have different needs, and therefore the services that a family office provides will be dependent on this.
Structure of a single-family office
Single-family offices come in a variety of forms and structures. These vary from small operations with just a few members of staff, to large organizations with several staff members. The number of services offered is what differentiates a small family office from a larger one. Therefore, services are often what define the size and structure of a single-family office.
Once again depending on the family, their needs, and how they want to organize their own family office, these can have different structures. A single-family office’s structure is often very similar to any public company. With a CEO overseeing all of the activities, a CIO controlling investments, a CFO looking over the finances, and a COO coordinating operations. Usually, these roles are occupied by family members. They are assisted by different investment teams that are carefully put together to manage different assets. The whole single-family office structure is also complemented by human resources, public relations, and accounting departments.
Activities of a single-family office
Many single-family offices are created following the sale of a large family-owned business. This leaves the family with a large number of assets that need to be invested. The main task of a single-family office is therefore the management of the family assets, and wealth.
The activity of a single-family will consist of managing investment portfolios, carrying out private equity projects, or acquiring and selling real estate. Each family office will define different goals, based on the family. The family office focuses not only on the day-to-day management of the family's assets but also on the preservation and growth of those assets and the preservation of family values over generations. Avoiding and mediating family conflicts is also one of the goals of some family offices.
A single-family office may be engaged to provide some degree of legal and tax advice. As well as estate and succession planning for a smooth transfer of wealth to the next generation. The implementation, administration, and management of wealth structures such as trusts, foundations, life insurance solutions, and corporations may also be part of a family office's practice.
Depending on the office, and the family’s needs, the family office may also deal with lifestyle management. The family office may be responsible for assets such as foreign real estate, art, yachts, and airplanes. As well as arranging travel and administrative activities for family members. A family office can also oversee philanthropic projects and the education of the next generation, and manage the family’s public relations.
Advantages of a single-family office
A single-family office Increases control and oversight, and it is a customizable solution for each family that can easily be adapted to their needs. It offers very specific services that are highly customizable depending on what the family wishes. Compared with the most common wealth management services single-family offices offer considerable advantages:
- Better control over the assets under management.
- No hidden fees and often lower costs
- No competing interests between the bank and the family in the investment
- Promotion of family cohesion and long-term
- Concentration of capital
- More efficient and individualized management of assets
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