Why use a Multi-Family Office?Enzo Caputo2021-09-23T04:22:50+02:00
Why use a Multi-Family Office?
The main reasons for families to engage a multi-family office are:
a holistic, independent approach to wealth management, and
a need for broader family support.
The fact that the overall costs of working with a multi-family office are significantly lower than those of running a single-family office is also quite important.
The multi-family office is used to manage your wealth once this has become so substantial that you lose the overview. It becomes too complex to manage alone, costs too much time or you simply lack the capacity and/or knowledge to manage it yourself. Also when several generations are involved it can become complicated.
The multi-family office will be your single point of contact, it can support you in dealing with a broad range of financial and other issues and can represent the family in all kinds of external situations.
Read further or contact us now for more information about multi-family offices.
From private banking to multi-family office services
As your wealth expands over the years (or often decades), the need for support in managing it will gradually grow. As a result of this development, most families first work with one private bank and, over time, use more private banks to diversify their investment risk. Of course this is different if you suddenly become wealthy (after selling the family business profitably or due to a large inheritance).
Besides banks, a wealthy family often uses other financial and legal professionals such as lawyers, tax advisors, trustees and accountants to manage or structure their non-financial assets, such as the family business, international real estate, private yachts, aircraft, art collections and private equity, for example. However, working with a growing number of financial and other intermediaries will increase your own administrative work considerably as this requires intensive communication and coordination.
Having attained a certain amount of wealth, a family starts to spend all its time managing their wealth instead of enjoying it and at the same time become dissatisfied with the standard of fragmented services provided. Moreover, if several generations are involved, it often becomes increasingly difficult to find a common perspective.
By engaging a multi-family office, the family will be able to reduce the number of advisors they cooperate with considerably and their wealth can be managed more efficiently. You no longer have to deal with various private banks and professional advisors yourself.
A multi-family office, acting as a single point of contact, can streamline and coordinate all your global financial and legal affairs and your family’s quality of life could increase considerably as a result of the services provided. A multi-family office supports affluent families with the management and organisation of their global wealth and acts as the coordinator for most of their needs.
The family office will have the overview and can control all assets and advisors accordingly, approaching the family proactively on a wide range of issues. You regain control of the family’s assets and have an improved opportunity to safeguard said assets for the next generation.
The multiple tasks of a family office
It is a common misunderstanding that all multi-family offices offer the same services. Multi-family offices rarely offer a full range of services, as it is highly complex and relatively expensive to employ all the necessary experts. Most offer a limited range of services, often connected in some way to the background of the family office founders. This means that it is difficult to compare what is being offered under the title of family office services.
Key activities of a multi-family office are the establishment of an overall investment strategy / strategic asset allocation, the coordination with banks (gatekeeper role) and the consolidation of all relevant financial information in one report. Some multi-family offices also organise and coordinate private equity, real estate or other direct investments.
This set-up saves you a lot of time and improves the focus on your investment strategy. It could also reduce your wealth and investment risk, as a financial professional will have a complete overview over all your assets. Managing a family’s risk is an important task of the family office; which private banks are for example stable and safe? It needs to be noted that not all family offices make investment decisions themselves, some only coordinate and monitor.
Transfer to the next generation
❝ From shirtsleeves to shirtsleeves in three generations ❞
A multi-family office may also act as a connection between family members or as a coach for younger generations. Research has shown that many affluent families are not able to preserve their wealth for longer than three generations. This is often caused by a lack of strategy within the family (with respect to tax, estate and succession planning) or a lack of communication between the family members.
A multi-family office can build long-term relationships with all family members and involve and financially educate the younger generation (please note that not all multi-family offices offer this service). As the family office is a third party, it is often easier for family members to work with the multi-family office as a mediator instead of dealing directly with each other. In the coming decades, an immense amount of wealth will transfer to the next generation, so a good multi-family office could play a vital role in aiding this process.
A good multi-family office often supports the family with all its wealth planning needs. There is access to a large network of external specialists and a wealth of experience has been gained in serving other affluent families with similar issues.
What happens when the next generation does not want to get involved in the family business? How do you sell a large company optimally tax-wise? What steps are needed when you consider buying property in a foreign jurisdiction such as the United Kingdom or Switzerland? How should you structure this, and who can you trust? Where should you start when considering acquiring an aircraft or yacht? How do you obtain a second citizenship?
These are all wealth-planning issues with which a multi-family office can assist you, with the necessary experience and a network of trustworthy external specialists in place. In this regard, it is also highly beneficial for you to select a multi-family office that serves clients similar to yourself, with similar issues, e.g. clients of a comparable size, from the same region or with a similar generational profile.
Lifestyle management & family support
A multi-family office may also be focused on the more practical needs of the family, such as providing secretarial services, offering local and international real estate management, supporting with the operational management of yachts and aircraft, defining to which foreign private schools you could send your children, etc. These kinds of so-called lifestyle management or concierge services offer a lot of convenience to the family members.
The multi-family office as trusted advisor
As most multi-family offices are privately owned, they have a low turnover of staff compared to private banks. Strong relationships are built over time between members of the family and the family office staff. In most cases a family office will become the trusted family advisor.
❝ Select a multi-family office that serves clients like you ❞
One of the most important reasons for this is that the multi-family office is not only involved in the management of the bankable assets, but also in all other investments and other equity-related decisions. Regularly, the office also plays a role in the family’s holding company. Guiding the future generation through education and mentoring can also contribute to creating such a strong relationship.
The costs of a multi-family office
One of the reasons families make use of a multi-family office solution is the costs involved. Establishing and operating a single-family office is simply too costly for most families (read more about the costs of a single-family office). Therefore, a multi-family office is without doubt the best alternative for those families seeking a highly personalised holistic service and who do not want to establish, or cannot afford, a single-family office.
Costs saved by the family office’s controlling activities can, in some cases, cover some of the actual expenditure for their services. You can find more about the costs of a multi-family office here.
Deciding to use a multi-family office
The decision to use a multi-family office is usually made only once in your life. Therefore, the selection of the appropriate multi-family office is a very important decision. Select very carefully, as your family’s future, wealth and fortune will depend on it. Since this is a unique decision, normally speaking, the question is how to select the right multi-family office. There is clearly not a ‘one size fits all’ solution.
Every multi-family office operates differently, has a different philosophy, culture and communication style, offers different services, is experienced in specific areas and has its own level of professionalism. Choosing the one most able to deliver the specific services your family needs is, therefore, essential. One should also keep in mind that different multi-family offices may provide similar services in widely differing manners.
Use of the title ‘family office’ is not protected
Moreover, the title “family office” or “family officer” is (in almost all jurisdictions) not protected. This means that anyone, or any company, can use these titles to offer “multi-family office services” without having any specific qualification or experience. So how do you ensure you are getting exactly the high standard you need? And are you sure whom to actually approach for the provision of these services?