The global family office space is a rapidly growing one, the total estimated assets under management of family offices across the world stands at a whopping $5.9 trillion, and the wealth of the families backing these offices totals to around $9.4 trillion. With such vast amounts of wealth in play, there is an urgent need to distinguish genuine family offices from the firms that masquerade as family offices but in reality, are just traditional wealth managers. It is important for high-net-worth (HNW) and ultra-high-net-worth (UHNW) families to ask the important question: Are these family office entities who they say they are, or are they just private banks and traditional wealth managers?
The line between a family office and other wealth management firms is a thin one due to little or no clear asset size demarcation. Scores of firms today borrow the title of a family office, but in reality, they do not provide the multifaceted and personalised services that a true family office would offer. Knowing this distinction is crucial for HNW and UHNW families; a genuine family office could mean the difference between financial security or ruin.
Traits of a true multi-family office
Genuine multi-family offices are all about understanding a business-owning family and its needs, and drawing up customised wealth management solutions based on these understandings. Family office managers form deeply personal and long-lasting relationships with HNW and UHNW family members. This helps them understand the structures within a family and the kind of wealth management services they need. Forging these bonds also helps a family office to observe the family dynamics and politics firsthand; this helps to draw up the right kind of succession plans. By gaining as much knowledge as possible about a HNW/UHNW family’s values, vision, mission, and objectives, a family office can make customised operational and investment decisions.
True-breed family offices also offer the best-in-class asset managers because they spend a lot of resources on acquiring the right kind of talent from across industries. This talent pool contributes to a genuine family office’s wide range of in-house services. From legal counsel to CFO services to overseas education advisers, a true family office can offer a diverse set of services and products under one roof.
In addition to offering personalised services, a true family office is always fiercely client-centric. A family office puts its client’s interest before all others; it follows a strict no-commission policy which helps it to have its client’s best interests at heart. Traditional investment firms and wealth managers have obligations towards financial service companies whose products they are supposed to sell, while a true-breed family office is only aligned to its client.
Another major area in which an actual family office helps HNW and UHNW families is that of multi-generational financial planning. For many HNW and UHNW families, creating wealth and sustaining it for the younger generation is a daunting and tricky challenge. True family offices can aid UHNW families secure and grow their multi-generational wealth in several ways. They help with the drafting of wills and creations of trusts that will ensure that a family’s wealth is handed to the rightful heir, and they can also manage mentoring and counselling the next generation in a family. Private banks and traditional wealth managers are not in a position to offer such services because they haven’t cultivated decades-long relationships based on trust and value.
True-breed family offices also offer the best-in-class asset managers because they spend a lot of resources on acquiring the right kind of talent from across industries. This talent pool contributes to a genuine family office’s wide range of in-house services. From legal counsel to CFO services to overseas education advisers, a true family office can offer a diverse set of services and products under one roof.
Armed with these client-centric values, true family offices work towards helping UHNW individuals grow their fortune and preserve it for generations to come. And identifying these true-breed family offices is an invaluable step for every UHNW family as it leads to the path of preserving and growing their legacy and wealth.
Views are personal. The author is principal founder and MD, Entrust Family Office.