Every family needs help to simplify their lives. But the more assets it owns, the larger the scale of this assistance should be. The number of issues that families with high net worth deal far exceeds the level of concerns of families with modest income:
- Managing a large number of real estate;
- Reading extensive analytics;
- Monitoring investment performance;
- Submission of financial documentation to government agencies;
- Timely payment of all taxes, etc.
That is why they need a variety of specialized services that would make their life easier. As the experience of managing the affairs of wealthy families shows, the most effective option is management from a single center. This role has been taken on by family offices, which coordinate many aspects of the lives of affluent families.
What Is the Purpose of Family Offices?
Family offices are created to provide comprehensive assistance to wealthy families to the extent that clients need it. Sometimes, it is enough to give professional advice on some legal, financial, or other issues, and sometimes, family offices need to take full responsibility for some issues, for example, managing an estate. With the help of family offices, wealthy families free up time for personal activities, open up new perspectives, and gain a sense of security that all family matters are carefully managed.
Certuity Company is a well-known high-net-worth family office https://certuity.com/family-office/ in the USA, whose experience is based on managing the affairs of many affluent families. The Certuity team emphasizes the need for a holistic yet personalized approach to each family. Only in this way can a family office contribute to the development of family well-being and the implementation of the plans of all family members.
Types of Family Offices
When choosing a family office to entrust your finances and other affairs to, you will encounter different types of companies. Some are focused only on serving one family, while others have many clients. At first glance, it may seem that Single-Family Office (SFO) is better and more prestigious. But later, you will see that the Multi-Family Office (MFO) has many more opportunities, contacts, and experience, which makes it easier to cope with all your tasks. In addition, SFO is an operationally expensive option and will require significant expenses from your family. On the other hand, an MFO will perform all the same functions but for a significantly lower fee. Therefore, you need to determine in a family meeting what your priorities are and which partner you prefer to manage your affairs.
Comparison of Single-Family Office and Multi-Family Office
| Indicator | Single-Family Office | Multi-Family Office |
| Number of families served | Dedicated to serving a single family | Servicing many families, up to 50-60 |
| Composition of the team | Formed based on the needs of a specific family | A multidisciplinary team, which includes specialists in all key areas |
| Payment for services | Expensive | More affordable price, cost-effective |
| Main advantages | Higher level of privacyCustomized servicesConfidentiality | Greater negotiating powerMore experience due to the running of different clientsMore opportunities to diversify investment portfolios |
In addition to these two main types, you may encounter others that are less common. In particular, Denise Kenyon-Rouvinez and Jung Park, who study trends in the development of family offices, add the following types:
- IFO — institutional family office
- PFO — professional family office
- CFO — commercial family office
- EFO — embedded family office
- VFO — virtual family office
What Services Does a Family Office Provide?
The range of services that Multi-Family Office offers its clients depends on their requests. The standard list of services includes wealth management, financial planning, investment strategy development, consolidated reporting, estate planning, etc. But this list can be expanded to include other services that the family needs. For example, Certuity Company offers its clients philanthropy coordination, preparing the next generation to manage family affairs, and much more.
Management and Coordination of Financial Affairs
This group of tasks includes many issues related to financial planning, allocating investments, monitoring their execution, etc. A family office provides access to multiple investment opportunities, monitors promising projects, studies their reliability, etc.
Reporting and Tax Payment
Preparation of financial reports is a very painstaking and responsible job. The slightest mistakes can lead to severe punishment. Therefore, the help of professionals on these issues is extremely important.
Estate Planning
Correct transfer of inheritance is vital not only for preserving all family assets, peace, and harmony in the family. Since significant assets are being transferred, it is necessary to develop the optimal plan on how to do it in terms of paid commissions. This way, you can increase the share of the fortune that goes to the heirs and reduce the share of related payments.
Family Wealth Education
For younger generations to become reliable successors to the family business, they must undergo comprehensive training. The family office will teach them about strategic planning, sound investment management, fair distribution of assets in the family, and many other issues that they will deal with in the future.
Philanthropy Coordination
Many wealthy families are engaged in charitable activities. However, to spend finances effectively, it is necessary to control funds allocated for philanthropic projects. Otherwise, they may go into the pockets of scammers who will only imitate the activity. The family office assists with the planning, organization, and execution of charitable projects so that the family’s philanthropic goals are achieved.
You can approach a family office with a different range of tasks. The team that will serve your family will be formed based on your goals and needs. Even if you are not going to completely transfer the management of investments to an MFO but simply need advice, specialists of the company will be happy to help you. When you know that you can rely on a team of professionals, you will feel more confident and gain peace of mind. Your property, investment projects, and numerous assets will be under the reliable management of an experienced team trusted by many other wealthy families.