With great wealth comes great financial responsibility that requires complex accounting and sophisticated coordination of people and resources. A family office is a business management structure that can greatly simplify and increase efficiencies of the neverending compliance, tax, and legal work required to maintain a thriving family business that will last for generations.
What is a Family Office?
Family offices are wealth management business structures custom built to suit the specific financial needs of individuals and families of high net worth.
They are different from traditional wealth management firms in that they bear the burden of responsibility in day-to-day business management affairs.
Family offices bring together a multidisciplinary team to ensure that all areas of a family’s financial structure and wealth management strategy are in sync.
The history of the family office may be traced back to nineteenth-century industrialists and corporate titans such as Rockefeller, Carnegie, and Vanderbilt. These families recognized that hiring their own specialist team to manage their money was more practical and cost-effective than working with a variety of large banks, law companies, and accountancy organizations.
This model is still used by the world’s wealthiest households. Private family offices are used by billionaires like Bill Gates, Jeff Bezos, and Elon Musk to manage and build their fortune, which encompasses sophisticated assets, enterprises, trusts, charities, and lifestyle holdings.
They engage teams of professionals to work entirely for their families in order to enhance their net worth and ensure the continuity needed to pass it down through the generations.
According to Ernst & Young Global Limited, the world has at least 10,000 single-family offices. And the majority of them arose in the last 15 years. The increase in wealth for the world’s wealthiest households is the cause of this aggressive growth. In reality, private family wealth exceeds the combined value of private equity and venture capital.
Structures of Family Offices
Family offices today exist in several structures and they provide a wide range of financial services to the more affluent families.
The two common structures are single-family offices that serve one family and multi-family offices that serve a few families and benefit from economies of scale. Bässler Group is a multi-family office that also provides business and lifestyle services that make clients’ lives easier.
Services Provided By A Family Office
Accounting Services
- Invoicing
- Bill Payment
- Payroll/Benefit Coordination
- Budgeting/Forecasting
- Financial Reporting & Analysis
Strategic Consulting
- Business Advisory
- Outsourced CFO/COO
- Financial Health & Consolidation
- Due Diligence Support
- Ad Hoc Reporting & Research
Client Representation
- Compliance – Federal, State, Local
- Estate Planning & Strategy with Third Parties
- Investment Planning & Strategy with Third Parties
- Tax Planning & Strategy with Third Parties
- Treasury Management
Financial Planning
- Tax strategy
- Portfolio management
- Generational wealth transfer
- Charitable giving
- Estate planning
- Insurance and risk management
- Others
The Benefits of a Family Office
A family office is a common-sense solution that families devised to transfer their financial, administrative, and future-planning responsibilities to a single, coordinated team that they supervise. Family offices have evolved over time to provide a variety of financial and non-financial benefits to their owners.
Financial Benefits
1. Higher Returns: Risk-adjusted returns are higher in family offices. This is attributable to a number of factors:
- Their ability to better allocate resources for a certain family in a completely customized manner.
- They have more institutional-quality investing options available to them.
- Their investment decision is focused and cautious, and they are not restricted by certain financial service providers.
- Their ability to utilize and select investments that are consistent with a family’s core values and skills.
2. Lower Cost: Having a specialized family office can be less expensive than not having one. This is true as long as the family’s assets are sufficient to cover the office’s operating costs, which typically necessitates striking the correct balance between a committed internal workforce and the use of external advisors/experts. Overall, using a family office to centralize asset management and monitoring helps a family avoid duplication of work and achieve improved efficiency. This is because adding one additional family member only adds marginal cost to many functions. Furthermore, investing in a huge pool of assets is less expensive than investing in several smaller accounts, which gives you more negotiating power.
3. Increased Chances of Achieving Financial Goals: When a family organizes the important aspects of their wealth and family business into a structured family office, they are more likely to have important conversations about their goals, values, time horizons, risk appetite, and overall mission and vision for what they are building together. With this type of structure and method, families are more likely to achieve their wealth goals.
Non-Financial Benefits
4. Efficient Oversight and Time Saved: Families with well-functioning family offices save a lot of time by delegating and streamlining the administration and execution of operations.
5. Well-informed Family Members: The family office serves as a hub for information that is consolidated and routinely reported to the family owners and extended family.
6. Execution of the Family’s Long-Term Vision: Many families aspire to develop successful enterprises with strong cultures, to do good, or to leave their mark on the world. Family offices can help families achieve their long-term goals and meet their broader requirements, such as unity, talent development, and societal influence.
Five Compelling Reasons For Hiring A Family Office
1) Personal
This is the most significant reason. A family office has a completely individualized approach and, unlike other service providers, serves only one client: the family.
2) Prosperity
Because family wealth is dispersed across numerous generations, each with varied needs, there will always be a need to strike a balance between wealth accumulation on the one hand and family members’ financial needs on the other.
3) Privacy
A family office allows a family to keep all of their personal information in one safe location that is only accessible to a select few people. As a result, the family office can act as a guardian and gatekeeper of the family’s privacy.
4) Perpetuity
Typically, family wealth has a definite purpose. The family office can assist the family in defining a clear family purpose and, as a result, assist them in establishing a legacy that will be passed down through the generations.
5) Professionalism
There clearly is a trend for families to manage their wealth in a very professional way, as a business on its own, with a dedicated team of experts. As family wealth and family businesses are getting more international, professionalism is key.
The wealth of a family may be too complicated for a single counselor to handle. No one can claim to be an expert in all areas of finance. There is a limit to what a single person can achieve. A group of experts, on the other hand, with access to immense resources, has essentially no bounds.
Our experts at Bässler Group can help you set up a plan that best suits you and your family. If you would like to speak with an experienced wealth management family office, contact us today! Visit our website to learn more.
