I have spoken, written and consulted extensively on the nuances of the family office. I blogged on the importance of having a family office rulebook, on the necessities of auditing the family office, even how to make sure a family office will outlive the founder.

Those topics are crucial to helping ensure a family office is run professionally, for the long term and avoids the operational feel of being in a “silo.” However, the article I wrote in 2020, “The Single-Family Office: Do I need one and is it right for me and my family,” is worthy of revisiting.

Some high net-worth individuals and families value the delegation of relatively mundane chores so as to add to their quality of life they couldn’t contemplate life without some format of a family office.

What is a “family office” and what is its role? It is a dedicated team to oversee the management of various assets; the maintenance and staff for the primary residence, vacation homes or other properties; oversight of and / or distribution of money, investment dividends or other “allowances” to family members, such as children or the spouse; the oversight or management of the financial assets; and the oversight of investment managers and accounts for the family’s philanthropic foundation or giving. It can be any mix of the above, as they come in all shapes and sizes.

I want to differentiate this from a single individual who may be a trusted advisor, an ex-CFO of the family business, an attorney, CPA or banker. I would not term these people as a family office, but rather a gatekeeper. They are quasi family offices.

Talk to a legal or accounting firm that provides family office services to multiple clients and they’ll likely explain the benefits borne of “economies of scale.” They have teams to handle the different processes, so why would anyone hire an individual or team solely to focus on their assets?

While the convenience of having a professional handle recurring bill-pay and staying atop affairs of the house, home and assets is undeniable, the debate rises as to whether you require a family office at all, and if so, should you go for a single or multi-family approach. One measure is the value of the assets in question: Families with assets up to $400 million might hire a multi-family office to reap professional management – with potential cost savings. Families whose assets are higher might decide to build their own family office (otherwise known as a Single-Family Office or SFO).

A multi-family office does deliver many of those promised economies of scale, especially if more tasks are rolled into the agreement. However, multi-family offices can charge as much as 50 basis points on the assets under supervision (i.e., what they oversee); that’s atop any fees charged by any underlying managers or investment firms investing your assets.

In today’s market, if you’re hoping to make a 4-5% return on your investments, you need to calculate how much of that is going to finance the cost of your family office. Keep in mind, you will still have other additional costs such as your CPA, legal counsel, and other advisors to boot. And in today’s market, who knows what your net return will be after accounting for inflation.

Many families who determine they need a family office seek them out in an ad hoc fashion. They might ask their accountant or legal counsel, their banker or financial advisor. But be sure to know what you’re looking for, otherwise you may end up having the wrong setup and paying more than you anticipated.

I was introduced to the Single-Family Office of a South American family that wasn’t paying attention to their family office. Their infrastructure grew beyond their needs and became a fiscal drag to the family.

No different than building a house or a boat, the initial conversations need to be around the needs, from that we begin to map out the services, mission statement and a plan. Difficult conversations need to occur on whether you truly require a family office, or if this is a status symbol. Next is to determine the type of people you need to hire and map out the potential cost of such an endeavour. Once a decision has been made to move forward, the hard work begins on finding the CEO, building the roles and responsibilities, the internal protocols and finally the hiring and implementing.

Whether you’ve decided that you need a single or multi-family office, or you want to audit what you currently have in place, start with an independent advisor. They can help assess your needs, seek out prospective candidates or firms, do background checks and due diligence in the selection process, then perform recurring oversight.

Built and managed well, the right family office should become a trusted part of your family and your legacy. Let’s discuss how to make that happen.