Family offices are private wealth management firms that cater exclusively to the preserving and growing the wealth of high-net-worth families. Over the years, the family office landscape has evolved to meet the unique needs of affluent families, resulting in different structures that offer tailored services. Broadly, UHNI families looking to start a family office have four primary structures that they can choose from - Single Family Office, Multi-Family Office (Private), Multi-Family Office (Commercial), and Virtual Family Office. Let’s take an in-depth look at these four structures to understand which one best meets your requirements:
Single Family Office (SFO)
A Single Family Office is a private organization that exclusively manages the wealth and affairs of a single family. SFOs have been the traditional model for family offices since their inception, with roots tracing back to the 19th century. The primary objective of an SFO is to preserve and grow the family's wealth for current and future generations while addressing various needs such as investments, tax planning, estate planning, philanthropy, and risk management.
The structure of an SFO is highly customizable and can be shaped to accommodate the specific requirements of the family. Typically, an SFO is staffed with a team of dedicated professionals who possess expertise in areas such as finance, law, accounting, and real estate. SFOs provide a personalized, hands-on approach to managing the family's assets and affairs, often resulting in deep and long-lasting relationships between the family and their advisors.
Some prominent single family offices in India are Aarin Capital, Ajay Piramal SFO, Artha India Ventures, Arun Sarin Family Office, Brightstar Investments Ltd, Bryanston, Burman Family Office, Catamaran Ventures, Cyrus Poonawalla Group, Fundamentum, Infina, JSW Ventures, Mistry Ventures, Murugappa Group, PremjiInvest, RAAY, Raintree, RARE Enterprise, RNT Associates, Sharrp Ventures, Shiv Nadar Foundation, Innovations Investment Management, Unilazer Ventures, Yukti, among others.
Privately Held Multi-Family Office (PH-MFO)
A Privately-Held Multi-Family Office (PH-MFO) is a family office structure where one family acts as the anchor, contributing to over 50% of the assets under management (AUM). This model allows the anchor family to share the family office's infrastructure and services with a limited number of other families, typically not exceeding eight. By pooling resources and sharing costs, PH-MFOs offer a more cost-effective solution while still providing a high level of service to the participating families.
In a PH-MFO, the services offered can be customized to each family's unique needs, including investment management, tax and estate planning, risk management, philanthropy, and family governance. However, the services may not be as customizable as a single-family office due to the involvement of multiple families.
Multi-Family Office (Commercial)
The commercial model of Multi-Family Offices are operated by financial institutions such as wealth advisory firms, banks, wealth management firms, or asset management companies. These MFOs offer a range of services similar to those provided by other family office structures, including investment management, tax planning, estate planning, and risk management, and non-financial services such as succession planning, family governance, and philanthropy.
These MFOs have evolved from offering standardized solutions to creating bespoke services, personalised for the family’s needs. Coupled with the advantage of leveraging the resources, expertise, and infrastructure of a large financial institution, they are an attractive option for families who prefer to engage with an established financial institution. This can result in a higher level of investment opportunities, research, and access to a broader network of professionals.
Waterfield Advisors is one such prominent commercial Multi-Family Offices in India.
Virtual Family Office (VFO)
The Virtual Family Office is a relatively new model that leverages technology to provide a comprehensive suite of services to high net worth families. VFOs are characterized by their flexible, agile, and cost-effective approach to managing family wealth. Rather than maintaining a physical office and a dedicated in-house staff, VFOs consist of a network of independent professionals who work remotely to provide the required services.
VFOs are well-suited for families who seek a tailored solution without the overhead costs associated with a traditional family office. By leveraging technology and a virtual team, VFOs can provide a wide range of services such as investment management, tax planning, estate planning, and risk management. The VFO model also enables families to access a broader pool of talent and expertise, which can be scaled up or down as needed.
As the family office landscape continues to evolve, affluent families have an increasing number of options to choose from when it comes to managing their wealth and affairs. The choice of family office structure will largely depend on the family's specific preferences, and objectives.
For those seeking a highly personalized and tailored approach, a Single Family Office may be the most suitable option. On the other hand, families looking for access to intellectual capital along with a broader range of services and expertise may find a Multi-Family Office to be the best fit. For families looking for limited services, lower costs, and technologically driven solutions, setting up a Virtual Family Office could be the apt proposition.
Regardless of the chosen structure, it is essential for families to carefully evaluate and select their family office partner to ensure a successful, long-term relationship that promotes the preservation and growth of their wealth for generations to come.
