TitleCard Capital confirms that family offices began with The Rockefeller family office that was founded in 1882 managing some US$43 billion in assets for a range of families, individuals and global institutions. But what exactly is a family office,
For a smaller family whose main asset is a family business, the family office may simply be a personal assistant who, as well as dealing with business administration, assists family members with more domestic matters such as paying the cleaner and gardener, and making travel arrangements. At the other end of the scale, a wealthy family may have a family office with staff ranging from investment advisers, lawyers and property managers.
The need for a family office, is based on the volume of work that needs to be done, underused staff may not be worth the cost. It is therefore related to the wealth of the family and also how many businesses that they have assets in and how many things they are trying to run for themselves.
The next consideration is the amount of expertise that the family are going to need to run their business, will this require lawyers and so on? Would it be better to hire on an ad hoc rather than permanent basis is also another consideration?
For families with noteworthy wealth, their properties may be adequately large and multifaceted to merit a team with wide-ranging expertise and knowledge
Some families will pool their resources with other families and share lawyers this can have both pros and cons.
A major advantage is the division of overhead costs. It also makes it easier for the professionals to be objective as they are not just involved with one family. Also there may be a sharing of ideas that have benefited one of the other families in the past and this can be beneficial for all.
There are, of course, negative points also for example confidentiality and also maybe sometimes the professional might feel torn in any decision-making processes that might affect both families that they work for. This conflict of interests can have major repercussions for everyo9ne involved.
Some financial institutions offer a selection of services to a family with a dedicated point of contact and a team at their disposal. They can then hire in services as required such as financial services or
Lawyers. This can keep the family’s costs down and can also make them be subject to very differing ideas which can again be advantageous and not so but it will give the family leaders an opportunity to see who they like working with and why and it will stop any of their employees becoming complacent.
Using a combination of in-house and subcontracted out services can provide a useful check on the dependency of the family on their family office. Some family members do resent how things work but when a family get so powerful and wealthy and have so many business assets it becomes the sensible thing for them to do.