Should Your Firm Add A Family Office?

Where to Start and What You Need to Know

As the number of those with significant wealth continues to increase so does the demand for deeper, broader, and higher-touch assistance in nearly every aspect of their lives. Thus, the rapid growth in demand for family office services and for the profit and business-building promise they offer.

First introduced to the United States in the early 19th Century, the number of family offices has grown to nearly 6,000 domestic family offices — managing more than $4 trillion — and as many as 10,000 globally1. The profit potential is obvious; and because today’s affluent clients expect far more than investment management services, many wealth advisors are adding family office services to their current capabilities. If you are considering this option, here are key insights to bear in mind:

  • Envision a New Model
    Imagine a different way of doing business. Rather than serving a large number of individual clients, picture your business as one that delivers sophisticated, customized, and holistic solutions through a limited number of multigenerational relationships based on privacy, confidentiality, and trust.
  • Define the Family Office
    As its name suggests, a single-family office focuses on serving a single family group while a multi-family office serves more than one family group. Functional definitions include the “administrative family office,” which handles bookkeeping, tax, and numerous administrative services as well as the “hybrid family office,” which offers administrative, tax and legal advice while tapping outside resources for other services. The “fully integrated family office” delivers a range of services from administration, accounting, and reporting to tax and legal advice, and comprehensive investment management.
  • Create a Suite of Services
    Integral to the appeal of family offices is the broad range of specialists available to decipher complex issues and assist with diverse financial concerns. Clients expect to benefit from the expertise of CPAs, attorneys, financial advisors, wealth managers, estate planners, as well as professionals knowledgeable in M&A, IT and cybersecurity, intergenerational wealth transfer, charitable giving, real estate, art, and other concierge services.
  • Analyze Expenses Realistically
    Ensuring a high degree of centralized, personal service is expensive. In addition to staff and administrative costs, technology requires major outlays to cover systems, upgrades, maintenance, cybersecurity and data protection, among other vital functions. All told, it can require investable assets approaching half a billion dollars or more to balance ROI with operational costs2.

 Family Offices: A Formula for Success

Thriving family offices abide by three primary rules: First, provide objective financial advice. Second, leverage a team of tax, legal, and investment professionals to work across disciplines to deliver creative solutions to financial problems. Third, take a long-term view on relationship building; doing so leads to less attrition among clients and more growth for your family office.

The appeal of serving the promising high-net-worth market is indisputable. If developing the necessary infrastructure is more of a challenge than you can realistically address, consider the benefits of partnering with an existing, experienced family office. Firms like Sanctuary Wealth, already positioned to provide you with regulatory compliance, services, expertise, resources, and cost efficiencies, are well worth exploring. Like you, many RIAs who have made the move to independence are also making the move to Partnered IndependenceSM to leverage the promise family offices afford both their own and their clients’ futures. 

1 Real Assets Adviser, March 1, 2018: Vol. 5, Number 3

2 “Family Fortunes” by Tara Loader-Wilkinson, The Wall Street Journal, 14 June, 2010