What is a Family Office? — Susan Schoenfeld
Susan R. Schoenfeld, CEO and Founder of Wealth Legacy Advisors LLC serves as a ‘thought partner’ to families of wealth through personal attention and human spirit. Susan is an award-winning Thought Leader; she provides guidance on legacy, next-generation, stewardship, governance, leadership succession, and philanthropy. She recently spoke on Family Office Structures at Opal Group’s Family Office Forum in New York City.
“What is a family office” is a very interesting question. There is a great deal of confusion and disagreement about the term. In the past 20 years, there has been a proliferation of RIA’s and wealth management firms calling themselves family offices because it’s the new “it” label, and it may be seen as a way to attract new investors.
There are two main types of family offices, the Single-Family Office (SFO) and the Multi-Family Office (MFO).
SFO’s manage the finances and other matters for a single family. They often have a team of dedicated staff on the payroll, possibly including investment, tax, philanthropy, accounting, legal, estate planning and governance personnel. They may also outsource certain of these functions to external service providers. My general rule of thumb is that, because of the high costs associated with operating an SFO, a family should not consider creating one if its assets are less than $500 million. Of course, every general rule has exceptions, and a family may have particular reasons to establish an SFO at lower asset levels, especially if the family’s investments are primarily in real estate or other specialized industries. There are many families that have just one employee who is responsible for only the family’s investing, and one can argue whether that is a true family office or not; it depends upon your point of view.
An MFO provides those services to more than one family. The term originated when, for economies of scale, wealthy families formed into small groups who were similarly minded, similarly situated, and had complementary needs. They were able to scale their resources, scale their expenses, and coinvest in private deal flow. They could bring on a CIO and compensate them in such a way as to keep them engaged. They could also hire staff to perform other concierge-type services, including tax work, investment roll-up reporting, and the true concierge services, such as travel, household staff management, and governance.
MFO’s can be comprised of a small group of families or, more recently, they might actually be a large wealth management firm offering a basket of family wealth services, either for a bundled investment management fee or billed a la carte.
There has been a huge proliferation of late in true family offices and also firms that call themselves family offices. Depending on your point of view, maybe they are in fact family offices or maybe they’re not, but if you’re here and you’re talking about these issues, then welcome under the tent.
Susan Schoenfeld, a public speaker & thought partner to families of wealth and their advisors, is an award-winning thought leader. Susan’s switch from successful estate planning attorney and CPA to a trusted family advisor and thought partner was inspired by families of wealth asking her searching questions beyond estate tax planning. As a conflict-free advisor who provides no investment, tax, or legal advice and sells no product, Susan shares her insights directly with wealthy families and with financial services experts. She is active as a keynote speaker and a leader of break-out sessions and workshops at conferences throughout the US.
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