With the boom in private wealth creation – especially at the very high end – there’s a corresponding explosion in the number of single-family offices. The main appeal of single-family offices for the ultra-wealthy is control. The founders of single-family offices are able to create the organization that they see best meeting the needs, wants, and preferences of the individual and the family.
When done “right” single-family offices are fairly structurally flexible. This permits them to readily adapt to changing circumstances: a clear example of control. “Many providers claim to have perfected the family office model. In reality, the ideal structure is different for each client because the goals, resources and values of every ultra-wealthy family are unique,” said Rick Flynn, managing partner of Flynn Family Office (FFO). “Outsourcing family office services can actually increase control for clients by allowing greater customization in creating the family wealth plan. Ultra-wealthy inheritors are even more likely to be personally involved in shaping the structure of the family office and in selecting advisors and specialists.”
Among the more established single-family offices where the next generation is becoming actively involved there’s a trend to new variations in the single-family office model.
The hub-and-spoke model, for instance, is where the parent’s single-family office provides the administrative support, advanced planning expertise and lifestyle services. The inheritors, meanwhile, are taking their monies and investing independent of the parents. The inheritors set up “satellite” offices focused on managing their investments. This results in the inheritors maintaining many of the advantages of a full-service single-family office without having to duplicate a variety of desired services.
Another variation is the hybrid-family office. Previously the distinction between single-family offices and multi-family offices was quite definitive. Now, the lines are getting blurry in places. Previously, when a single-family office converted to a multi-family office by accepting outside ultra-wealthy families as clients, the conversion was in total. Today, a number of single-family offices are establishing separate multi-family office entities while their single-family office continues to service their own family.
When implemented properly, the math of the hybrid-family office is impressive. The ability to leverage resources of the single-family office and profit from the multi-family office has – so far – proven very beneficial to all parties.
What’s clear is that single-family offices – in response to the requirements of the ultra-affluent – are going to continue to evolve. While they’ll likely maintain their core structure and deliverables, the way they can be configured will enable them to stay at the cutting-edge in the service of the ultra-affluent.