A single-family office is a business entity that manages the wealth and assets of very high-net-worth individuals. But how is a single-family office structured, and how does that affect investments?
In this guide, we’ll cover the structure of a single-family office and some keys to investing. That way, you can better understand whether working with a family office to manage your capital, organize your finances, and maintain your family wealth for generations is right for you.
Single Family Office Investment
Single-family offices are used by wealthy families looking for someone to manage their capital and investments. A single-family office (SFO) is capable of managing all the family’s wealth and is guided and overseen by experts who make decisions to maintain the heritage for generations.
A well-structured family office has professionals focused on the implementation of investments and trading that manage each related process. As for investment services, family offices include an external investment manager to whom assets are assigned. And sometimes, these businesses also offer an internal investment manager.
With this in mind, it’s easy to see that one of the main objectives of SFOs is to manage investments properly. The success of the family office depends on developing a solid investment strategy.
Single-family office investments can help individuals who need assistance with:
- Wealth management
- Leveraging assets to invest
- Preserving heritage for generations
If you fit into one of these buckets and have significant wealth, it might be time to open a family office.
How Much Money Do You Need to Open a Family Office?
To open a family office, you won’t need a set sum of money. Instead, you’ll need to invest a percentage of your assets. Generally, a family office can cost up to 1% of a family’s total wealth. Of course, everything depends on the number of services that you are going to use for the benefit of the family capital.
It’s worth clarifying that, generally, the assets of a family decrease over time. This can lead to the need for more services in future generations, which can mean an increase in the complexity of services needed from a family office.
Each additional service adds up, pushing up the price of a family office. Additionally, the number of professionals in charge, the operating facilities of the family offices, the financial and commercial management systems, insurance, and legal expenses, can all lead to an increase in the amount of capital needed to open a family office.
If you’ve already set aside the initial investment and are ready to open a family office, however, you’ll need to know about the structure of this organization. That way, you clearly understand how your wealth is being managed.
What is Family Office Structure?
Despite being split into various teams, family offices work together closely. They ensure that a family’s vision, goals, and needs align with the decisions made in the family office.
Here’s a closer look at how these family offices are organized. That way, you’ll better understand how these types of businesses operate and manage wealth.
Family Office Organizational Chart
The Executive Team at a Family Office
Executive teams in family offices are usually made up of a single small team. In most cases, it’s made up of the following.
- An Executive Director: In charge of directing the entire investment portfolio.
- An Investment Manager: Who makes all investment decisions.
- A Financial Director: Responsible for financial and fiscal operations.
- A Director of Operations: Who is in charge of day-to-day operations.
Smaller family offices rely exclusively on this executive team. In contrast, SFOs that manage large sums of assets can be divided into other teams.
For example, in the case of a CEO, each asset class has a chief investment officer responsible for the area. This is because the management of all the information and capital under the administration of a single person could be complicated.
These are just some situations where family offices may have an investment team aside from the executive team. Here’s what to know about the investment team and how it operates.
The Investment Team at a Family Office
The investment teams at family offices constantly look for opportunities to invest, carry out transactions, and analyze the behavior of investments. Although a family’s assets differ, investment teams work together closely and sometimes require the support of partners, analysts, or professional advisors.
Specialized directors lead these teams with strong leadership skills in finance. These directors are responsible for overseeing and keeping the teams meeting each family’s goals and making key investment decisions.
In case of significant decisions, directors confer with a family investment committee or an investment council to make the final decision.
Some of the investment management teams that exist within many family offices are the following.
- Financial Investments: Teams that handle investment management in financial markets such as shares.
- Real Estate: A team responsible for managing properties and real estate assets.
- Private Equity and Venture capital: A group of individuals in charge of investments in private companies.
- Other Investment Teams: Teams that are responsible for investments in different assets such as art, and renewable energies, among others.
As well as the leading teams in a family office, there are also back-office teams. Let’s learn a little about them.
The Back Office at a Family Office
As in traditional companies, family offices have a team in charge of daily operational functions. In smaller SFOs, some teams are outsourced, but larger ones usually have their own teams.
Some of the back office teams in a family office include the following.
- Accounting, taxes, and risk management: Individuals that work closely with the Director of Investments and create reports such as balance sheets, income, and tax declarations, among others.
- Human resources and operations: A team responsible for hiring qualified employees to develop service activities.
- Public relations: A team that tries to reduce public media coverage and deal with negative reports about the office and the family.
- Portfolio management: Portfolio management is responsible for closely monitoring all movements of the family’s assets.
- IT: The most prominent family offices have IT security teams that protect the data used, stored, and transferred in the office.
Now you have a solid understanding of the back office teams in many single-family offices. However, if you still have a few doubts to clear up, check out the below FAQ.
Frequently Asked Questions About the Single Family Office
A small Family Office may consist of just the executive team, and a few assistants and typically has five to six employees. However, a medium-sized family office can have a staff of up to 15 people, while a large family office will often employ anywhere from 25 to 40 people.
Generally, you should have a minimum of $50 million or more to start one family office. However, family offices offer advice to families with assets starting at $20 million.
Families and High Net Worth Individuals (HNWI) who want financial freedom must delegate investment and wealth management to experts to a family office. Additionally, those who need help managing family wealth or large sums of money may find a family office useful.
Single Family Office Structure - Conclusion
The typical single-family office structure is designed to manage and administrate very high net-worth families’ assets properly. The structure involves well-prepared teams that preserve a family’s heritage through successful investments.
If you’re interested in the world of investments, regardless of whether you’ll use a single-family office structure to manage them, you should join the investor club. Here at Willowdale Equity, you can invest in private multifamily real estate across the southeastern United States and share in all the tax benefits that come along with it.
- Centro Law, “The family office investment policy and process“
- Brown Brothers Harriman, “Seven Considerations Before Creating a Family Office“
- Family Office Hub, “Organizational Structure of Single-Family Offices“
- Forbes, “How To Build A Family Office“
- The Wall Street Journal, “Financial Advice, Served Rare“
📈 Increase in Value After 15 Months – 80%
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📈 Return of Investors Capital on Refinance – 62.5%