Building a Family Office

Updated: Feb 28

A family office is a privately held company that handles investment management and wealth management for a wealthy family, generally one with over $100 million in investable assets, with the goal being to effectively grow and transfer wealth across generations. The company's financial capital is the family's own wealth. A family office can cost over $1 million a year to operate, so the family's net worth usually exceeds $100 million in investable assets. Some family offices accept investments from people who are not members of the owning family.

Why create a family office?

-Protect your family's privacy

-Ensure control over family holdings

-Simplify administrative work

-Create continuity across generations​

-Manage various risks facing the family

-Oversee family enterprise and wealth

-Manage family wealth and pass it down

-Pool family resources

-Focus on family needs

How to Build a Family Office-According to Forbes

"The first and most important step in creating a family office is to define the goals of individual or multiple family members and create an organizational structure. Creating a family office is very similar to establishing any other business entity, in which developing an organizational structure is the first move.

Involve CPAs and attorneys in the process to provide input on how to structure the family office, as there are many legal and tax issues involved. The next step is to determine whether you want to establish the family office in house or have a third party create the structure, hire personnel and provide and maintain basic services.

Once that determination is made, the next step is to decide which assets will be managed by the family office, and which ones will be managed by one or more of the family members. Many times, family members want to continue investing on their own aside from the investments of the family office.

Scope And Costs Of A Family Office

As with any new entity, the scope of the operation and the associated costs need to be assessed prior to deciding to open one. There are many different sizes of family offices, ranging from small to very large, and the size will be dependent on the amount of wealth requiring management as well as the types and diversity of assets that the money is invested in.

Generally speaking, a small family office would have about six employees and would cost anywhere from $1 million up to $2 million to operate annually. A medium-sized family office would require 15 people to operate, with an annual operating budget of $3 million to $4 million. A large family office would need approximately 25 employees with an annual budget of $8 million to $10 million. When considering a very large family office, you’d be talking about 40 to 50 employees with an operating budget of $14 million to $20 million.

A cost analysis must be done to determine the amount of income generated each year versus the costs of operating the family offices. Additionally, you should be aware that the number of employees includes both professional staff as well as household staff. The professional staff will be in place to not only help retain the wealth that’s been created, but also to grow the wealth. Also, the support staff of a large family office might include household staff, such as drivers, security, personal attendants or even a yacht crew, if needed.

So, while the number of employees may seem high, they often include a lot of ancillary services. There is no one size fits all, and if you looking to start a family office, knowing the first steps and estimated costs will help you make an informed decision."-Forbes

Summary: Multidisciplinary professional services firms are formed by law, accounting, insurance, and other professional services firms to offer clients new multidisciplinary approaches solving increasingly complex issues. One of those approaches is that of The Virtual Family Office. You do not need $100 million in investable assets for our team to work with you. We want to apply our multidisciplinary firm approach to the success of your family.

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