Column: Ask these questions if you’re considering a family office

By Jason Glisczynski

As the number of affluent American households continues to rise, so does interest in professional family offices designed to address their many and often complex needs—both financial and otherwise.

It’s not entirely clear just how many family offices exist in the U.S. One study by Capgemini estimates there are around 3,000 single-family offices—each one catering to a single family—and roughly 150 multifamily offices that serve more than one family. Another report estimates there are more than 7,000 single-family offices around the globe.

And of course, the rise of virtual family offices in recent years means that some wealth management firms that aren’t technically classified as family offices have a real family office look and feel.

But family offices aren’t a panacea for every wealthy family. Key questions must be asked and important considerations must be assessed when families start thinking about possibly getting involved with a family office of some kind.

That’s true even if you’re not part of the super-rich (net worth of $500 million or more) community to whom family offices tend to cater. Today, even many “merely affluent” families can work with their wealth managers to create virtual family offices that feature many of the capabilities of the more traditional options.

Single-family office considerations

Some things to think about if you’re exploring the idea of a family office include the following:

• Single-family offices provide a menu of deliverables to a wealthy family, either directly or by engaging with external experts.
• Single-family offices are in a position to oversee and work with an array of external experts in a coordinated, synchronized manner.
• Working with professionals who are leading authorities in their respective fields requires a belief in their integrity and abilities.
• The role of family members in a single-family office can prove very beneficial, very problematic, or (usually) something in between.

Reasons to avoid the SFO route

Despite the advantages that single-family offices can bring, there are a wide variety of reasons wealthy families should not establish single-family offices. The following are some of the questions that (depending on the answers) might indicate that a single-family office is a poor choice.

• Are the expectations of what a single-family office can accomplish impracticable and unfeasible?
• Are there deeply ingrained, grave, and truly irreparable conflicts within the family?
• Is the single-family office explicitly and purposefully understood to be a boutique business?
• Are the lines of communication open and working well?

So, where does that leave wealthy families?

Based on our experiences working with wealthy families that either want an SFO or already have one, it has become apparent that for a meaningful number of affluent families, this business model is not appropriate. In addition to these broad issues, there are others that can easily erode the value of a single-family office—or worse, make it a costly disaster.

You can read the full article here: https://spmetrowire.com/category/opinion/

Jason Glisczynski is co-owner and principal advisor for Silvertree, LLC. Investment Advisory Services offered through Brookstone Capital Management (BCM) LLC, a Registered Investment Advisor. Silvertree, LLC and BCM are separate companies. Visit www.silvertreeplan.com for more information.