The single-family office is an organizational structure, which manages the financial and personal affairs of one exceptionally wealthy family. Because a single-family office is driven purely by the needs and preferences of the one family, there is no standard for how one should be structured. It is designed and operated around that one family.
Multifamily offices deliver many of the same services and products available through a single-family office to less affluent individuals and families. As profit-making enterprises, a significant percentage of them are focused on delivering great results, but within the parameters of their business model.
Two variations of the family office model have recently been gaining traction. One is the multi-single-family office and the other is the virtual family office.
With a multi-single-family office, a very limited number of wealthy families pool their resources to create the equivalent a single-family office, where they are the only clients. However, a trend beginning among some well-preforming multi-single-family offices is to slowly expand their charter to take on more and more very wealthy families.
Multi-single-family offices often provide expertise not very common among traditional multifamily offices. For example, SDS Family Office is a state-of-the-art multi-single-family office, with all the traditional capabilities of a high-performing single-family office, plus more.
In addition to extensive direct investing, including having established a consortium composed of single-family offices and some exceptionally wealthy individuals, SDS Family Office is adept at traditional investment banking functions such as raising debt/equity capital and advising on business acquisitions or sales. The firm also has extensive expertise with cross-border concerns such as facilitating arbitrage opportunities and ensuring the flow of funds between jurisdictions.
Next is the virtual family office. Successful individuals and entrepreneurs across the wealth spectrum, who cannot afford or do not want the governance responsibilities tied to a single-family office, are gravitating to this structure. The virtual family office is where a professional acts as coordinator of a network of specialists on behalf of successful individuals and families.
There is a very nuanced and significant difference between virtual family offices and multifamily offices. This difference makes virtual family offices more like the single-family offices of the super-rich as opposed to multifamily offices working with a number of less wealthy clients. Each virtual family office is bespoke. They are customized to an entrepreneur, for instance, very much like single-family offices are customized to their wealthy families. These entrepreneurs do not hire virtual family offices as they would a multifamily office. Instead, a professional will tailor a unique virtual family around each one of them.
Virtual family offices provide all the “magic” of a single-family office for those who cannot afford or prefer not to have a single-family office.
Overall, the family office model is proving superior to other versions of wealth management. Consequently, there is a growing demand for them, and the appeal is resuling in the creation of new family office models.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.