The ultra-wealthy are families with a net worth of US $30 million or more and more techies into the billions. If possible, they are choosing to establish single-family offices. The ability of single-family offices to be in sync with the wealthy family, act proactively and be right on point is a great advantage. Single-family offices eliminate many of the problems the ultra-wealthy face, such as the inherent biases of professionals, lack of synergy and the structural nature of the private wealth industry favoring professionals.
Based on the perceptions and insights of senior management of founders’ single-family offices, the discontent between what they wanted and needed and what they were getting from their previous professionals was a solid motivator to establish their single-family offices. The biggest problem is that these various professionals did not really understand the founder and the family, cited by nine out of 10 of the respondents.
About two-thirds reposted that each type of professional was narrowly focused and promoting their expertise. No matter how good they are, most professionals tend to operate within their own silos. This often proves ineffectual and disconcerting for wealthy families. Being forward-thinking, flexible, and not “salesy” is also essential and leads to the wealthy choosing single-family offices over other options.
Findings in our survey of elite private client lawyers reinforced this perspective. Seventy percent said wealthy families seriously consider establishing single-family offices because other options are lacking.
According to Angelo Robles, founder and CEO of Family Office Masterclass, “One of the biggest advantages of single-family offices is that high-performing ones are holistic solutions providers. Being holistic solutions providers start with being ‘built’ around each wealthy family's idiosyncratic needs and wants. Because a single-family office understands all aspects of the wealthy family, it can deliver synergistic solutions. This maximizes outcomes, leading to superior results compared to other providers.”
Single-family offices are designed and operated for the ultra-wealthy family; thus, they can be much more comprehensive than other firms. Also, single-family offices can conceivably access any service or product in existence. It is all a matter of connectivity.
While the appeal of single-family offices among the ultra-wealthy is considerable, there are better answers for some families. Sometimes, single-family offices are not the best option because of the set-up and management costs. Sometimes, it is a poor choice because the ultra-wealthy wealthy family does not want the responsibility for continuous oversight. Whatever the rationale, there are other possibilities for these ultra-wealthy families and a broader array of less affluent families, most notably working with a leading multi-family office. However, selecting a top multi-family office is critical as many financial firms use the moniker as a marketing ploy.
According to Homer Smith, founder of Konvergent Wealth Partners and co-author of Making Smart Decisions: How Ultra-Wealth Families Get Superior Wealth Planning Results, “We can duplicate and provide much of the capabilities single-family offices provide the wealthy families in the world to families that cannot or choose not to establish single-family offices. Our approach ensures that the families are in complete control as they would be if they had a single-family office, every viable solution is available to them, and all the solutions are extremely cost-effective.”
Russ Alan Prince is the executive director of Private Wealth and a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.