For the exceptionally wealthy, the single-family office is, for the most part, the preferred way for them to coordinate financial and personal affairs.
The expertise provided by a single-family office is generally wealth management (investment management and wealth planning) and support services (administrative and lifestyle services, and special projects).
Most importantly, by adopting a truly client-centered holistic perspective and generating synergies, single-family offices that are run well are able to deliver outstanding results that are aligned with the needs, wants and preferences of super-rich families with a net worth of $500 million or more.
Single-family offices are certainly not for everyone. One obstacle is that they can be expensive to run. Many rich families instead prefer the alternative of using a multifamily office.
In a study of 206 ultra-wealthy individuals with a net worth of $30 million or more, nearly three-quarters said their preference is to work with a multifamily office compared to other financial services providers. Another 15 percent like wealth management firms. Less than 10 percent choose investment advisors. The remaining few percent opts for planning firms. Clearly, individuals with money are strongly attracted to multifamily offices.
Today it is probably possible for most financial advisor to establish a virtual multifamily office. Multifamily offices traditionally have a substantial number of diverse professionals in-house and turn to a small number of external experts on an as needed basis.
The relationship between in-house experts and outsourced niche specialists, however, has flipped. More external experts are on call than experts housed in advisory firms. The trend for multifamily offices (and single-family offices as well) is to take advantage of this pool of outside experts and go virtual. Most multifamily offices have a relatively small core group of professionals with an expertise in investment management supported by a diverse network of specialists who are available when circumstances demand.
The nature of the virtual multifamily office enables a wider array of families to benefit from the same synergistic approach and extensive expertise of a single-family office. When done right, a virtual family office can provide not only coordinated solutions that are in accord with client wants and needs but a much broader array of high-impact solutions.
With the demand by a growing percentage of wealthy families for the benefits of a single-family office, the number of virtual multifamily offices is likely to continue to rapidly multiply. For financial professionals wanting to build substantial advisory practices with the wealthy—particularly the ultra-wealthy—being able to provide them a multifamily office is increasingly essential.
With the trend to outsourcing, the ability to establish a virtual multifamily office is certainly within the abilities of a great many financial professionals. While there is strong demand, there is still the need to effectively position the virtual multifamily office to the wealthy and other professionals who can refer wealthy families.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.
