What Does a Family Office Do?
Have you ever wondered who does the budget for Bill Gates and people like him? The ultra-rich have very complex lives, and they need teams of people to manage it all: corporations, investments, philanthropies, their children's schools, the domestic staff and managing the private jets. All of this falls under the responsibility of the Family Office.
You might be thinking that a family office is a wood-paneled study with rows and rows of old books stacked as high as the vaulted ceiling. Not quite. When dealing with billionaires and ultra-wealthy families, the family office is a group of experts who manage nearly every aspect of their wealthy client's lives.
You might be thinking that a family office is a wood-paneled study with rows and rows of old books stacked as high as the vaulted ceiling. Not quite. When dealing with billionaires and ultra-wealthy families, the family office is a group of experts who manage nearly every aspect of their wealthy client's lives.
How are family offices and financial managers different?
Family office roles defined
When you need expert advice on investing in the stock market, you can go to a financial professional for guidance; but that individual can only give you advice about the financial world.
Family offices are a sort of one-stop shop where experts in many fields are all under one roof. There are a whole team of experts who specialize in different areas: taxes, transferring money to heirs, charitable giving, household staff, and lifestyle management.
The lifestyle management wing of the family office is particularly complex because they are interacting with the high-net-worth families daily. The person who runs the lifestyle management department is often a very experienced Executive Personal Assistant who acts as a sort of private concierge. They oversee personal and professional business travel, booking restaurants, managing the executive protection team, and even hiring private tutors for the children.
Family offices are a sort of one-stop shop where experts in many fields are all under one roof. There are a whole team of experts who specialize in different areas: taxes, transferring money to heirs, charitable giving, household staff, and lifestyle management.
The lifestyle management wing of the family office is particularly complex because they are interacting with the high-net-worth families daily. The person who runs the lifestyle management department is often a very experienced Executive Personal Assistant who acts as a sort of private concierge. They oversee personal and professional business travel, booking restaurants, managing the executive protection team, and even hiring private tutors for the children.
What are the different kinds of family offices?
There are either single family offices or multi-family offices, sometimes identified as SFO or MFO. Essentially, they both have the same functions, but the single-family office works exclusively with one family, and the multi-family office works with several families. This often involves the management of billions of dollars.
You might be wondering why anyone would want to share experts and use a multi-family office. Simply put, hiring a team of experts to serve ultra-high net worth families is incredibly expensive, perhaps in the millions. So, some families share that expense. If a family has incredibly wealth in the billions, then it's likely that they will have a single-family office.
You might be wondering why anyone would want to share experts and use a multi-family office. Simply put, hiring a team of experts to serve ultra-high net worth families is incredibly expensive, perhaps in the millions. So, some families share that expense. If a family has incredibly wealth in the billions, then it's likely that they will have a single-family office.
How much does it cost to run a family office?
Costs of running a family office
Affluent families could expect to pay about 1% of the assets managed to the family office; however, this is conservative because it does matter on the lifestyle of the family. Just a small family office with six staff members could cost $2 million a year to run.
If the family's needs are complicated, then many more support staff will be needed, and that could substantially increase the cost of the overhead. These figures of course don't include the cost of the domestic staff working on the estates. All in, some families could be spending more than $10,000,000 a year on staff.
For high-profile executives like Facebook founder Mark Zuckerberg, it's been reported that he spends $10,000,000 a year on security personnel alone.
If the family's needs are complicated, then many more support staff will be needed, and that could substantially increase the cost of the overhead. These figures of course don't include the cost of the domestic staff working on the estates. All in, some families could be spending more than $10,000,000 a year on staff.
For high-profile executives like Facebook founder Mark Zuckerberg, it's been reported that he spends $10,000,000 a year on security personnel alone.
