For various reasons, many single-family offices have or are opening or considering opening their doors to ultra-wealthy non-family individuals and families. While this perspective is relatively new, it is gathering steam.
In evaluating the investment returns of many single-family offices, they often represent “smart money.” Many single-family offices have produced superior investment returns over extended time frames. Some family members and non-family senior executives see this as an opportunity to expand and bring in additional ultra-wealthy families as clients. The result is:
- Becoming or establishing a multi-family office, or
- Creating investment products that accept non-family monies, or
- Both.
When senior management decides to establish a multi-family office or provide investment expertise in products such as a fund to wealthy non-family clients, this commonly involves maintaining the existing single-family office and creating new structures such as a “cousin” multi-family office or an investment fund.
According to Angelo Robles, founder and CEO of the Family Office Association and author of Effective Family Office, “The most prevalent reason for going in this direction is profit. The aim is to capitalize on the investment prowess and other services of the single-family office to make money for the organization and the family. Related is the ability to leverage the investment expertise and capabilities of the single-family offices.”
Often, the single-family office senior executives or members of the wealthy family have received serious interest from other ultra-wealthy families, which is a strong reason they are considering a multi-family office structure or making specific investment capabilities available to non-family clients. This is more common among single-family offices that have been operational for over five years.
Based on experience, many single-family offices, transitioning to multi-family offices or providing investment expertise to wealthy non-family members are plagued by problems because of the substantial differences between the operational processes of single-family and multi-family offices. At the same time, there are very effective ways to transform from mild to extensive process engineering to acquiring investment advisory platforms. Nevertheless, this trend is likely to accelerate.
Russ Alan Prince is the executive director of Private Wealth and a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.
