If you’re looking to set up your business or in case you’re working for the corporate sector, you must have heard the term family office.’ It is quite trending these days as many people in the corporate industry use it; however, only a few know what it means.
Contrary to its name, it isn’t about office space. A family office? Refers to a private wealth management company created and managed by a high-net-worth family. Simply put, a family office means a family-owned business venture passed on to the next generation. It doesn’t have a board of directors and rarely sells its shares or dividend stocks.
Moreover, numerous people call it a one-stop financial space for the elites or the aristocrats. Furthermore, anyone with $30 million or more to invest can have a family office. Therefore, it is becoming increasingly popular in the business world due to enhanced flexibility and the world’s economic conditions. Not to mention, it provides complete autonomy to one person or family over its capital. Apart from that, some factors help differentiate the family offices. They include:
- Size: Family offices range from a few million to several billion under management. There’s no fixed amount when it comes to family offices.
- Source: The sources of family offices are also different. Mainly, there are two sources, single-family offices, and multifamily offices.
- Strategy: A family office’s primary goal is to preserve money; however, they also focus on growth and capital appreciation.
- Structure: The structure of family offices is also different from one another. Some revolve around one advisor, while others have a board of investment advisors.
Modules of Family Office
As mentioned earlier, there are two modules, aka sources, of a family office. One is a single-family office, and the other is a multifamily office. So let’s have a look at them and see what they mean:
Single Family Office
During the late 19th century, more family offices emerged in the US. In other words, a modern version of family offices came into being. Traditionally, it is said that a family office revolves around one person. The central idea behind it was to have a financial advisor who handles all the business needs of one family or individual, especially their investment needs.
With the growth in businesses, these firms are also expanding their capacity. Many family offices that were initially created to look after the financial needs of one person are now dealing with hundreds of clients, and that’s how single-family offices become multifamily offices. A multifamily office keeps revolving around high-net-worth people; the only difference is that it has more than one client.
Subjects of a Family Office
Now that we’ve established what a family office is and how it works, let’s see who works at the family office. Since a family office offers a wide range of services, it hires employees from different fields, just like a regular multinational or financial institution. The following is a list of subjects of family office, people who are commonly employed in a family office:
A family office requires legal advice now and then. It is mainly why family offices always hire a lawyer. Not just that, many of their clients solely rely on legal advice and prefer getting it from experts. Investment matters and other things like estates and trusts need to be legally evaluated; thus, it will be right to say that lawyers/legal counselors serve a significant role in the functioning of family offices.
- Tax Advisors
Another important subject of a family office is a tax advisor. Family offices from around the world employ several lawyers as well as accountants who specialize in taxation. They work by providing tax relaxation to the company’s clients and saving them a considerable amount of money.
- Wealth and Investment Manager
The primary pillars of a family office are wealth and investment managers. Their job is to look after the money, which is the central focus of a family office. They invest money on their client’s behalf and help them enjoy the profits. Also, because family offices deal with vast amounts of money, wealth and investment managers can set up new funds or add money to the existing ones. Apart from the ones mentioned above, a range of office staff works in family offices for management purposes. Suffice it to say that a family office works just like any other financial institution. The difference is only about the money and, subsequently, revenue.