Single-family offices are on the rise. Their numbers have been increasing in step with the growth of private wealth. Additionally, the amount of money they control is growing incredibly. With more and more families considering a single-family office, there is an expanding cadre of professionals looking to help them establish single-family offices. The compilation is that many of these professionals are thinking about the matter from their viewpoints.
Many lawyers are focused on jurisdiction and structure. Accountants are focused on the tax implications. Consultants center their advice on family governance or the requisite technology, depending on the type. Investment advisors look at the assets and how they can be managed. While all these elements are essential, they are readily accessible.
What one high-end professional can provide, another can as well. For example, all top-of-the-line lawyers can structure a single-family office and work in various jurisdictions competently. If a family is talking with a lawyer, these issues tend to take precedence. Meanwhile, if a family is speaking with a consultant, mission statements, vision statements, and family constitutions supported by well-run family meetings takes precedence.
In setting up a single-family office, jurisdiction, structure, tax implications, family governance, technology, investment options and the list will be part of the mix. But all of these elements are secondary. There is a question the family has to ask itself before ever considering any of these various elements. By answering this question, the family can best manage the professionals to maximize the value they get.
The question we ask families that are interested in setting up a single-family office is:
What outcomes are you looking for from your single-family office?
High-performing single-family offices are all about delivering superior results to the family. Superior results are on-point and cost-effective. This is only possible when the family is clear about the desired outcomes. Most professionals, at best, get a superficial understanding of the families and then quickly move to show them why their expertise is important. What’s required is for the professionals involved to develop a deep understanding of what the family wants to accomplish and then help them create a bespoke single-family office to ensure they get superior results.
Helping families work through and refine their desired outcomes is essential for the subsequent single-family office to prove invaluable. Regrettably, this is the exception as opposed to the norm. Therefore, it often behooves the family to make the requisite effort to think through their desired outcomes, or they are likely to be disappointed with the results they get from their single-family offices.
The good news is that, increasingly, professionals are concentrating on the families and their agendas instead of their expertise. Still, families must always ensure they are clear about the outcomes they want and that the professionals they engage are working to help them achieve those outcomes.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.