Guiding families through the myriad of options is important and must be made in the context of the individual family’s needs.
For example, a family may decide that an SFO structure is the most appropriate model if the family only invests in private investments. These types of families may not have any investable assets and MFOs may not have the ability to make these types of clients profitable. (Note: Some MFOs, including CPA firms, offer family office services that are not based on assets under management (AUM). SFOs created by private investing families usually hire an experienced “deal” professional as CEO or CIO to head the family office. They in turn hire due diligence professionals to evaluate the private investments, accountants, and other professionals to serve the family’s needs.
On the other hand, if the family has sold a family business or had another type of liquidity event, they are in a much different position. They need to invest their assets. In this situation, a MFO could be a great choice, acting as the family’s outsourced CIO. MFOs are more likely to be able to attract and retain the talent needed to manage the portfolio of assets and will have the additional services that will be important to managing this wealth over generations.
Eddie Brown is national managing director and head of Schwab Advisor Family Office. Paul Ferguson, CFP, PFS, CLU, is managing director at Schwab Advisor Family Office.