Due to globalization and the increasing concentration of wealth, the trend toward professionalizing private wealth management and family governance is growing among affluent families. A key driver is the preservation and transfer of wealth to the next generation. In this context, so-called family offices are becoming increasingly attractive to wealthy families. Over the past few years alone, more than 8,000 family offices have been established worldwide.
Studies project that the family office industry will grow from a global market value of $138 billion in 2024 to $233 billion by 2029, representing an average annual growth rate of 11% over the forecast period (2024–2029).
Family offices primarily support families in managing and structuring their wealth. The scope and nature of this support depend on the unique needs and financial situations of the respective families. With increasing professionalization, existing structures, processes, and investment decisions can be optimized and adapted to evolving demands. While some families prefer advisory support from a trusted consultant, others have family offices that operate similarly to private equity investors.
In general, family offices can be divided into Single Family Offices (SFOs) and Multi-Family Offices (MFOs). Below is an overview of their key responsibilities and the various options for customization.
Single Family Offices
A traditional Single Family Office (SFO) consists of specialized service providers who assist the family in both day-to-day matters and wealth management. This can include personal assistants, property managers for domestic and international real estate, chauffeurs, and security personnel. The team is complemented by financial and legal advisors as well as asset managers who exclusively handle the family’s wealth. A classic SFO operates like a company, with the primary goal of securing, optimizing, and growing the family’s private wealth. Its core tasks include strategic investments and the legal and tax structuring of assets.
An SFO is particularly appealing to branches of families who have inherited wealth collectively and wish to preserve it. Examples include jointly managing and maintaining a valuable art collection or a real estate portfolio, where family interests are aligned, and long-term strategies are implemented.
Types of Single Family Offices:
Embedded SFOs: Some family businesses operate embedded SFOs, which often evolve organically from the family enterprise. In these cases, tasks for the business and the family are intertwined, making the SFO an integral part of the business structure.
Limited SFOs: Limited SFOs focus on specific areas of support, such as private investment firms that exclusively advise a single family on wealth management. With growing demand, some hedge funds have transitioned into limited SFOs by relinquishing their regular clientele to exclusively manage the wealth of a select few families. These SFOs often expand their services, offering additional options like legal or tax advice, though these services remain optional.
Hub-and-Spoke SFOs: Some SFOs cater to entire family clans rather than a single household. These so-called Hub-and-Spoke SFOs provide a flexible structure, centralizing certain financial management tasks (the "hub") while allowing other assets to remain under individual control (the "spoke"). This model helps reduce costs by utilizing centralized services more efficiently.
Multi Family Offices
The majority of family offices operate as Multi-Family Offices (MFOs) rather than SFOs. MFOs serve multiple families as clients rather than dedicating their services exclusively to a single family. The key advantage of MFOs lies in their lower costs and reduced operational responsibilities, making them especially attractive for families who may not wish to bear the financial burden of an SFO.
A classic MFO provides services to several unrelated or unconnected families. Depending on the size of the MFO, its service offerings, and the specific needs of its clients, it may serve a small group of wealthy families (known as single MFOs) or a larger network. Some MFOs also operate as Virtual MFOs, outsourcing requested services to external providers, such as banks, rather than delivering them in-house.
One notable advantage of MFOs is their ability to organize club deals for the families they serve. These joint investments enable access to exclusive and often more lucrative opportunities that may not be easily available to individual families.
Many MFO services are also offered by companies that do not explicitly identify as family offices, such as large financial advisory firms or private banks. These providers are referred to as Family Office Practices. Given the rising demand for MFOs and the desire for comprehensive, professional solutions, more established advisory firms are expanding their service portfolios. Their goal is to offer a "one-stop-shop" solution that meets the diverse financial and administrative needs of families.
Conclusion
Statistics clearly demonstrate that the trend toward establishing family offices and utilizing their services is not only continuing but accelerating. The professionalization of existing family offices is also gaining momentum, with the aim of managing family wealth more effectively and sustainably, particularly for future generations.
A family office can be tailored flexibly to the unique needs and goals of each family. This adaptability enables the development of customized solutions that are perfectly aligned with the specific circumstances and long-term strategies of the family.
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